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Everything he thought he would have time to plan for caught up with him, and now, he’s worried he’ill never be able to retire.
At 50 years old, he doesn’t have a lot of time left to save. His total retirement nest egg is $60,000.
When he had to quit his job to take care of his parents, it took a huge bite out of his savings. He left the job before he was fully vested, so he lost some of the employer contributions to his 401(k). He also made withdrawals from his 401(k), which came with penalties.
Luckily, he owns his home and is ready to downsize, in order to lessen the burden of keeping up both an aging house and a big yard. Since the house needs some work, he thinks he would net about $400,000 if he sold it.
Josh has now returned to the workforce, with a new job that brings in $40,000 a year. He wants to figure out how to maximize his savings and rebuild his retirement plan.
Do I have to delay retirement?
It’s becoming more commonplace that Americans choose to delay retirement because they are in a situation like Josh’s.
According to a recent survey by F&G Annuities & Life of 2,000 Americans over 50, 23% have already chosen to delay retirement — a jump from 14% in 2024. Reasons people gave for this decision included worries about having enough retirement savings, worries about inflation and fears of a stock market downturn.
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The survey also found that 70% of respondents were considering or were delaying when they would leave the workforce.
Another survey by Northwestern Mutual found that 51% of respondents said it’s somewhat or very likely that their retirement savings could run out. When 4,500 Americans over 18 were asked how much they thought they needed to save to retire, the “magic number” was $1.26 million. But for those who have begun saving, 25% say they have a year or less of their annual salary in savings.
How much does the average American actually have saved? The most recent data, from the 2022 Survey of Consumer Finances, found the median retirement savings of Americans to be $87,000. A far cry from $1.26 million, but close to where Josh currently finds himself. Still, his savings are low for his age. According to the Northwestern survey, 52% of gen-Xers say they have three times their current annual income or less saved.
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How can I reach my retirement goals?
Josh’s first step to grow his savings should be to contribute the maximum amount that his new employer will match for his 401(k). It’s always best to take advantage of the full matching amount from your employer, since it’s essentially free money.
Since he is over 50, Josh can also make catch-up contributions, which he should also aim to make. If he decides to sell his house and downsize, he could use some of the profits toward catch-up contributions.
Since Josh thinks his aging house will end up costing more as time passes, he should strongly consider moving to a smaller home with less maintenance issues. He should also develop a budget with aggressive savings built in, trimming down any non-essentials that he can.
There is hope that Josh could one day retire, but to maximize both the amount he’s able to earn, and the Social Security benefits that he will receive when he does retire, he should strongly consider delaying starting Social Security for as long as possible. Since Josh was born after 1960, the full retirement age for him is 67. However, if he waited until 70 to start his benefits, he would receive 24% more a month, which could go a long way to ensure his retirement is well funded.
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Rebecca Payne has more than a decade of experience editing and producing both local and national daily newspapers. She's worked on the Toronto Star, the Globe and Mail, Metro, Canada's National Observer, the Virginian-Pilot and Daily Press.
