How To Start Saving For Retirement at 50 +
Do you feel like it might be too late to start saving for retirement at 50 years old or older?
Debt expert Valentina Wilson is here to get you started with saving and investing, no matter what your age, situation or even your gender.
A Special National Women’s Day Introduction.
We are constantly trying to make our world kinder, better, and equal for all! But the harsh truth is that very little has been done to empower our women!
Being a woman, I hope that you are well aware of the gender pay gap in our country! A 2017 census bureau data has found that women in our country have earned almost 80% of their male counterparts! No doubt, it has narrowed with time. But still, it persists!
And this gender inequality exists in the case of retirement too! A 2019 T. Rowe Price report shows that in our country, the average male boomer has saved around $138,200 in his 401k! Whereas, the average female baby boomer has saved a mere $58,700 in her retirement account!
Can you imagine?!
During the golden years, we all want to lead a relaxing life and cherish the moments with our friends and family! But how will it be possible to do so if you don’t have adequate retirement funds?
So, on this Women’s Day, let’s take a step ahead to empower the women in our society! Here are some tips on how to save and invest in retirement, especially if you are 50 and above!
Calculate how much you need after retirement
The baby step to save and invest in your retirement is to find out how much you might need after retirement.
And therein lies the importance of the safe withdrawal rate! It implies the percentage of your accumulated wealth you can withdraw every year without running out of funds. Financial experts usually consider 4% as the safe withdrawal rate after retirement.
So, you can use a retirement calculator to get an idea about how much money you need after retirement!
Take Advantage of New Retirement Rules for Saving For Retirement At 50 +
Well, you might know that President Trump signed a new law on December 20, 2019. It’s known as SECURE (Setting Every Community Up for Retirement Enhancement) Act. There are a few changes with the retirement rules which can help you, like:
- You can get an extra 1 ½ years to grow your money in a traditional IRA or 401k without being depleted by distributions and taxes. The Act pushes the age at which you need to take Required Minimum Distributions (RMD) from 70 ½ to 72.
- Previously, contributions to a traditional IRA couldn’t be made after attaining the age of 70 ½. But now, you CAN contribute to your IRA even if you hit the age of 70 ½.
So, don’t wait, take advantage of more time you are getting to save for your golden years!
Make up your Time with the Help of Catch-up Contributions
Do you know about catch-up contributions?
Well, if you are 50 or above, you can make additional contributions to your 401k or IRA, known as catch-up contributions.
In 2020, you can contribute $19,500 ($500 more than the limit of 2019) to your 401k. And as you are 50 and above, you can stash $6,500 more as your catch-up contributions. So, in total, you can contribute $26,000 for your 401k.
In the case of an IRA, you can contribute a maximum amount of $6,000 in 2020. And for your catch-up contributions, you can contribute $1,000 more. That means you can contribute a maximum of $7,000 in total for the year 2020.
I would suggest you max up your contributions to your retirement account. This way, you can make up the time to some extent you have lost.
Get Rid of Debts Early
Do you have any outstanding debt?
If yes, then saving for retirement can be a distant dream for you!
Yes, you heard it right! Most likely, a substantial amount of your paycheck gets deducted to pay off your debts. As a result, you won’t be able to save that much for your retirement. So, find the best way to pay off your debts and live a debt-free life ahead! This way, you can live your life stress-free and save a substantial amount for your golden years!
Opt for a Health Savings Account (HSA)
Day by day, health care costs are rising in our country! A 2019 Fidelity report reveals that the average couple in our country will need almost $285,000 for health care costs!
To qualify for an HSA, you need to enroll in a high-deductible health insurance plan (HDHP). Every year, the IRS (Internal Revenue Service) reviews these plans and defines the minimum deductible and the maximum amount for your out-of-pocket expenses.
According to HealthCare.gov, in 2020, the IRS defines a high deductible which has:
- A deductible of at least $1,400 for an individual
- A deductible of a minimum of $2,800 for family
- Total annual out-of-pocket expenses of not more than $6,900 for an individual and $13,800 for a family.
How to use an HSA
So, once you are qualified for an HSA, find out how it works:
- Perhaps the best way to stash your money into your retirement account (other than 401k or IRA) and that’s too tax-free is by opting for an HSA!
Use your money for qualified medical expenses so that you don’t need to pay any taxes. But always remember that once you turn 65, you can take out your money from HSA for any reason. But you will have to pay taxes on it. - If your employer offers you an HSA, your contributions are deducted from your paycheck through a pretax payroll deduction. Otherwise, you can deposit into your HSA on your own. But you have to claim them as tax deductions while filing your income tax returns.
- Your health plan provider will give you a debit card or checks linked to your HSA account. So, you can use the balance for eligible medical expenses.
- Unused funds in your HSA roll over into next year. Your balance remains the same even if you retire or change your health plan provider.
Conclusions on How to Start Saving For Retirement At 50
The bottom line is, always remember that it’s always better late than never! So, don’t think that you can’t save for your retirement as you have already turned 50!
Follow the above tips to save and invest in your retirement at the earliest. And live happily during your golden years! Happy Women’s Day once again!
Great article. The company i work for pay in an equal amount to me into my pension pot. I really need to put more in to make sure i get the best out of this in retirement age. Some great ideas in this post though