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Saving for Retirement at the Last Minute

Written by Nickel - 14 Comments

I just ran across an article by Mindy Fetterman in USA Today that talks about the effects of procrastination when saving for retirement. She starts out by presenting the same sorts of numbers that we’ve all seen a million times before:

“If you’re 20 years old and you save $100 a month in an investment that earns an average 7% a year until you retire at 65, you’ll end up with $381,472. If you wait until age 40 to start saving $100 a month, you’ll have only $82,056.

If you wait until 50… Well, you get the point.”

So… If you’ve waited until the last minute, what can you do?

This is all pretty much common sense, but here are some steps to consider if you’ve procrastinated:

Save something. Instead of throwing up your hands and saying that it’s too late, save something. Anything is better than nothing, so don’t be paralyzed by fear. Do whatever you can, and start today. Take advantage of any tax-advantaged savings options that you might have at your disposal, and be sure to save at least enough to capture any matching funds offered by your employer — you’re going to need all the help you can get.

Save more. The only way to truly catch up if you start late is (obviously) to save more per month. Way more. The good news is that people 50 and older are eligible to put an additional $5,000/year into their 401(k), so it is possible to make up ground.

Spend less. In order to free up money for additional savings, you’ll need to spend a lot less. Start by plugging the little holes in your pocket, like a daily coffee, lunch out, etc. In all likelihood, that won’t be enough, so you’ll need to reign in your spending on bigger things, as well. The same goes for life after retirement. If you’re getting a late start, you’ll probably have to look at way to dramatically reduce your cost of living in retirement.

Work longer. Instead of retiring when you first qualify for social security benefits at age 62, you’ll likely need to continue working to age 65 or beyond. Working longer has multiple benefits, in that push back your retirement results in higher social security benefits, gives you more time to earn and save money, and reduces the number of years during which you’ll be dependent your retirement savings.

Of course, if you’re still young and you want to avoid all of this, then you should start saving as much as you can as early as you can.

Published on January 15th, 2008
Modified on February 19th, 2008 - 14 Comments
Filed under: Retirement, Saving & Investing

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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14 Responses to “Saving for Retirement at the Last Minute”

  1. 1
    Frugal Dad Says:

    Good ideas for late-savers. Another way people can generate more savings aroud pre-retirement age is to sell their home and downsize, investing the equity in either a paid-for, smaller home, or in conservative, high-yielding equities, or both. It’s hard for some to downsize if they’ve live a glamorous life up to this point, but with kids out of the house it usually makes sense to look for a smaller lot.

  2. 2
    Debbie M Says:

    Two points on saving more:

    1) Just because you’re eligible to save more doesn’t mean you actually have that much money to set aside. (That’s where your spend less section comes in.)

    2) Even if you’ve maxed out all possible retirement savings vehicles, that doesn’t mean you can’t save additional money the normal way. The only difference is that you don’t get a tax break. But if you put this money into investments that pay capital gains and/or dividends, those earnings will be taxed at a lower rate than your earnings (at least by today’s rules), so that’s still a kind of tax break.

  3. 3
    Brandon Says:

    I’d hate to be a late saver :-/

  4. 4
    Heidi Says:

    Great tips.

    I work for a defined benefit/defined contribution plan provider, and I know first-hand that there are LOTS of people who aren’t saving in the 40-55 age range. Typical excuse: “can’t afford to contribute to a retirement plan.” which really just means “I don’t want to spend less now to have something to spend in the future.”

    Other solutions: work 30 years for a firm with an excellent pension plan (good luck with that), take out a reverse mortgage (better own that home outright) or have kids that are willing to support you (ha!).

  5. 5
    ChristianPF Says:

    I like the options that the early savers have more than the late savers. We all make mistakes and hopefully we will learn from them. I am trying to learn my lessons early…

  6. 6
    Andy Says:

    I wish I could get a safe investment consistently returning 7% ;-)

  7. 7
    Ron@TheWisdomJournal Says:

    This is one reason why I’m trying to raise my kids to be money smart!

  8. 8
    plonkee Says:

    Actually in the UK, if you’re a really late saver you can actually work out to be worse off if you start, unless you do it in the right way (we have a minimum income guarantee). If you were in that situation, you should take specialist advice from people like the Citizen’s Advice Bureau.

  9. 9
    SavageBeast Says:

    I once read that if parents deposited fifty dollars every month from birth til the eighteenth birthday, at forty or so they will have nearly $500,000 dollars…love that compound interest. I meant to say into an index fund, S & P 500. Sorry about that clear as mud sentence..

  10. 10
    Minimum Wage Says:

    I’d like to see some actual stories of people who didn’t save for retirement. I see myself ending up in a flophouse when I can no longer work, paying two-thirds of my income for rent, and getting my food from Meals on Wheels.

  11. 11
    cheepy Says:

    How about moving to a developing country where dollar can get you a lot further? Of course the downside is that it is so far from friends and family, but you can get almost the same lifestyle with much less money.

    This is just my theory because I am an Indonesian who live in Australia. So if I go back to Indonesia, I practically quadruple my spending power, with the current exchange rate and current commodity price.

    What do you think?

  12. 12
    Minimum Wage Says:

    Yes, I think that is a very good idea, and one I’m researching. Problem is, while most countries welcome foreign retirees, they also typically require a certain level of income and/or assets which in many cases I cannot meet.

  13. 13
    Ij John Says:

    I am 50 and have little savings for retirement. I want to retire comfortabley. i have $1,500.000 in
    savings and a pension plan. I have just started putting in 2% of my income which is 12.00 per month,
    should I be worried. I plan to work til I am 75 years
    old. Help

  14. 14
    mike Says:

    I would like to meet this guy who has one million five hundred thousand dollars in the bank.does he think he is going to live to be one hundred and fifty.dont worry my friend you wont starve.

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