Retirement Planning For Late Starters (7 Practical Steps That Work)

Coffee, plant, and notebook on desk for retirement planning for late starters

It’s never too late to start saving for retirement!

If you’re like the majority of Americans, then you may be behind in your retirement planning.  And the closer you get to retirement age, the more you might feel that your situation is hopeless.

It’s true that the best retirement plans are those that involve beginning early and aggressively saving for decades. Starting late with your savings does add more constraints to your retirement plan.

Nonetheless, if you find yourself in your 50s and unprepared, there’s still a lot of hope.  You have options that can get you on track to building a sizeable nest egg.

In this post, I outline 7 steps to help with retirement planning for late starters:

  1. Cut expenses and generate more income
  2. Pay off your debts
  3. Adjust your lifestyle
  4. Use tax-favored savings vehicles
  5. Invest in opportunities with unlimited growth
  6. Create a retirement budget to live within your means
  7. Extend your retirement target date

It’s never too late to start saving for retirement, but the best time is now!

Need some help planning your retirement? Get this FREE mini-workbook and start creating the retirement you want!


You’re not alone

If you struggle with money shame over being a late saver, you might find some comfort in knowing that you are far from alone in your situation.

The results of a 2020 survey by TD Ameritrade reveal these concerning statistics for Americans aged 50-59:

  • 46% do not have a well-defined retirement plan
  • 37% have less than $50k saved for retirement
  • 41% have already withdrawn from their retirement accounts
  • 25% are heavily relying on Social Security to support them
  • 66% would give themselves a grade of “C” or worse on their current retirement savings

The good news is that it is never too late to start saving. The road to financial security for late starters is a little bit challenging; however, it is still possible if you buckle down and get strategic.

How much will you need to retire?

Having a savings goal to shoot for will give you direction.  But, how do you come up with a number that is sufficient *and* realistic?

Most financial advisors recommend you aim to replace 70-90% of your annual income with your savings, investments, pensions and social security.  So, if you make an average of $70k a year before you retire, you could likely be okay with an annual retirement income of $49k to $63k.

Of course, this assumes that your lifestyle will not change dramatically.  Most of your expenses will remain the same, except that you won’t have to put money in savings.  You may also have your mortgage paid off, which could significantly lower your monthly expenses.

However, if you plan on traveling more or moving to a higher-cost area, this may require a larger budget.  You also need to consider healthcare expenses in retirement, which will inevitably increase as you get older.

There are many details that go into your own personal retirement savings goal, which is why it’s a good idea to make a list of your plans and priorities for when you retire.

Calculate your estimated retirement savings

Try a variety of inputs to see how each component affects your retirement savings balance.

Retirement planning steps for late starters

Here are 7 steps you can implement to help you build your savings quickly and be prepared for retirement.

1.  Cut expenses & generate more income

As a late saver, you have time working against you.  This means reaching your retirement saving goals may require a significant amount of sacrifice and focus in order to catch up.

Your first plan of action should be to reduce expenses and increase income.

You may think you have no more expenses to cut, or your income is fixed.

And, that’s the mindset that probably kept you from saving more earlier.

If you don’t want to be working until you’re 75, it’s time to change your thinking.  Identifying and changing your limiting beliefs will create more willingness to do whatever it takes to reach your goals.

The first part of this step is to reduce expenses.  You can either look at your budget or track your spending for 2-3 months.  Distinguish between necessary and unnecessary spending, and eliminate or minimize what you don’t need.

This might include:

  • Dining out
  • Entertainment
  • Travel
  • Monthly subscriptions
  • Clothing & shoes
  • Car payments

Then, see what you can reduce with your necessary expenses.

Here are some ideas:

  • Reduce your mortgage payment by refinancing to a lower rate
  • Reduce insurance premiums by increasing deductibles
  • Reduce car payments by driving an older vehicle
  • Reduce student loans by combining them into one private loan
  • Reduce your grocery bill with online shopping and meal plans

As your expenses go down, your capacity to save goes up.

Another benefit to minimize monthly spending is that you will learn to live well below your means and get used to a reduced budget.  This will help you during your retirement years, when your income will be lower.

The second part of this step is to generate more income.  There are many ways to accomplish this, including:

  • Ask for a raise
  • Apply for a promotion
  • Get a weekend part-time job
  • Be a freelancer
  • Offer consulting services
  • Start an online business
  • Charge for your hobby

These days, starting your own side gig has never been easier.  You can be your own boss with the help of an established company (like Uber, Fiverr, Rover, etc.), or you can open up your own online shop with minimal investment.

For more ideas, check out these 25+ ways to make extra money.

The final part of this step is to be intentional with saving.

If you don’t have a plan for all this extra money, it will slip through all the cracks in your budget.

So, determine ahead of time the what, when, where, and how of your savings plan:

  • What additional funds will I save and not spend? (Bonuses, tax refunds, monetary gifts, etc.)
  • Where will I put these additional funds? (High-yield savings account, 401(k), piggy bank, etc.)
  • When will I add these additional funds to my savings account? (Once a week, every day, immediately, etc.)
  • How will I add these additional funds to my savings account? (Go to the bank, deposit online, create automatic transfers, etc.)

This might seem trivial and unnecessary, but being intentional with these decisions will eliminate tempting options when you see extra cash in your bank account.

Decide *now* so you don’t have to decide in the moment (when feelings can get in the way).

Some of these ideas may be a real challenge for you, especially if you’re stuck in a pit of limiting beliefs and scarcity thinking.

You may need to challenge some of your thought patterns surrounding money and wealth.  It could be these very beliefs and perceptions that are keeping you from making financial progress.

2.  Get out of debt

Okay, so this is easier said than done.

But, you’ll never be able to turbo boost your retirement savings until you’ve paid off your debts.

Create an aggressive debt payoff plan you can stick to:

  • Add up all of your debts (except the mortgage) and order them by payoff priority
  • Look at your budget (with your reduced expenses and additional income from step 1) and determine an amount you can commit to your debt balances every month
  • Create a timeline that indicates when each balance will be paid off, and when you’ll be debt-free
  • Keep a debt payoff tracker to log your progress

You’ll need to determine how you want to allocate the additional cash flow you create from step 1 because it’s a good idea to still build your retirement fund as you’re paying off debt.

Also, if you can reduce your debts in any way, be sure to explore those possibilities.  You can transfer balances to a promotional 0% credit card, combine them into a home equity loan with a lower rate, or even try to negotiate with the credit provider for a lower balance (this is a good option for medical debt).

Don’t discount any small step you can take to get your debt balances paid off.  With every dollar you use to lower one balance, you’ll have an extra dollar you can apply toward another.

3.  Make some lifestyle adjustments

Getting started late with your retirement planning often means you’ll need to make some lifestyle changes to reach your financial goals.  You’re racing against the clock, so ordinary saving methods may not be enough to build the fund you need by the time you retire.

If you’ve reduced your expenses, increased your income, and paid off your debt, but still need to generate more savings, consider increasing your cash flow using these tactics:

  • Downsize your home
  • Sell property
  • Sell a vehicle
  • Move to a lower-cost housing market
  • Reverse your mortgage
  • Rent out a room in your home
  • Sell other assets such as jewelry, antiques, collectibles, etc.

Some of these ideas may seem extreme, but your future financial security is at stake.

Weigh the cost of the sacrifice today with the benefit you’ll experience in retirement. You may find that downsizing and simplifying your lifestyle is great preparation for your future retirement.

4.  Take advantage of tax-favored savings vehicles

As a late saver, every little bit helps.  And, some of that help can come from your employer.

If your company offers a 401(k) plan, you should open an account and start putting money into one immediately.

Here are just a few benefits of a traditional 401(k):

  • for a traditional 401(k), you make contributions with pre-tax dollars, which reduces your tax liability
  • your savings (and earnings) grow tax-free as long as it remains in the fund
  • many employers offer matching contributions (typically 2-3%)
  • for those 50 and over, you can make catch-up contributions over and above the maximum limits
  • there is no age limit to make contributions, as long as you are still employed

However, if your employer doesn’t offer a 401(k) plan, you’ll need to find other options.  The most popular alternative is the IRA, which comes in several varieties.

The IRA is a great way to tax-shelter your retirement savings, but the maximum contribution limits are considerably lower than the 401(k).

Another way to save for retirement tax-free is with a Health Savings Account.  The HSA is like an emergency fund for medical expenses, and a great way to save for healthcare expenses in retirement.

5. Invest in opportunities with unlimited growth

When you only have 10-15 years to build the bulk of your retirement fund, conventional strategies won’t be enough.  This is because you need a lot more time for compound interest to reach significant exponential growth.

But, if you can find a way to build savings that isn’t limited by time or return, you’ll be able to boost your savings a lot faster.

One way to do this is by starting your own business.

With the internet, startup costs can be minimal and your potential reach farther than your local city.

And, once you find a niche that’s in-demand and profitable, you can start generating income relatively quickly.

Of course, starting and building a sustainable business takes time.  There are some risks, and nothing is guaranteed.  But, having ownership of the asset gives you the advantage of growing at your own rate.

With traditional saving strategies, you rely on the condition of the stock market and the limited funds you can afford to invest.

With a direct-ownership asset (like your own business), you have more control over how quickly you can generate profits.

And, with 10-15 years before retiring, you have plenty of time to grow a business that can generously supplement your other income sources.

Another opportunity to quickly build savings is through real estate investments.

This is a strategy that comes with higher risks, but also higher rewards.

With rental property investments, you risk the value of the property decreasing.  This is especially true in an economy that’s experiencing a recession.

However, this risk can be offset by the potential earnings you would make from the rental income.  If you wouldn’t need to liquidate these assets for immediate income, you could hold onto the property until its value returns to an acceptable level.

One way to minimize risk is to have a diversified portfolio of properties.  As you invest profits from one property to buy another, you build additional income streams that can protect you against exposure to declining markets.

Either of these strategies would typically require a serious hands-on, long-term commitment.  But the income possibilities they offer make aggressive retirement savings objectives possible.

6.  Create a retirement budget to live within your means

As you work on building your nest egg before retirement, also think about how you can lower expenses after retirement.

If you can live on less later, then you won’t have to save as much now, and you can reach your saving goals faster.

Here are a few ways to minimize expenses in retirement:

>>Pay off all debt

As mentioned above, get all of your debt paid off before you retire.  This includes your mortgage.

You don’t want to use your retirement dollars for paying off consumer debt, so create a debt payoff plan to get all of your credit cards paid off.  If the interest rates are high, you can transfer the balances to a 0% promotional rate credit card to reduce your bill.

If you have medical debt, set up payment plans with the healthcare providers so you have a timeline you can stick to.  Determine the lowest minimum payment for each balance that will have each bill paid off before you retire.

Sign up for a Health Savings Plan through your employer if one is offered.  You can save money *and* spend it on qualified medical expenses – tax free.

The HSA will help you pay off your medical debt faster, and then you can continue to make contributions for your healthcare expenses in retirement.

Your last debt to tackle is your mortgage.

You might find the task to pay off your mortgage too big to even consider.  However, if you choose to downsize to a smaller home in a lower-cost neighborhood, that goal could be a lot more achievable.

However, if the value of your home has consistently been increasing, you could continue to benefit from the seller’s market to gain the most profit.

But, the ultimate goal is to be mortgage-free by the time you retire.  Get advice from an experienced realtor to make the best decision about selling if you do decide to downsize.

>>Get insurance policies in place

You could easily use up all of your retirement fund quickly if you don’t have the proper insurance.

Of course, you’ll need the required policies such as homeowners and auto.

You’ll also need a healthcare policy because free Medicare does not cover everything.  (Having an established Health Savings Account in place will also help.)

All of these policies will help keep you from major financial outlays when unfortunate circumstances arise.

But, the one policy that can prevent complete financial ruin is long-term care insurance.  If you are ever in need of a nursing care facility, assisted living services, or in-home health care, then you’re going to need a long-term care policy.

These services will drain your retirement fund faster than you can say where’d all my money go?

So, make sure you include these policies in your retirement planning.  It’s the most effective way to minimize financial risk and protect your retirement savings.

>>Minimize investment fees

Many people only focus on the amount their savings will grow to *before* they retire.  But, those savings will continue to grow with compound interest over the span of your retirement.  And, the greater your return, the longer your savings will last.

So, it’s important to also maximize your earnings during your retirement years.

I recently read Tony Robbin’s book, Unshakeable.  In the book, he emphasizes the significant impact investment fees can have on retirement funds.

Specifically, just 1% can easily reduce your savings by one year’s worth of living expenses.  And, the bigger your savings, the greater the loss.

You can see this for yourself using the retirement calculator above. Just take off 1% from your estimated rate of return to find out how much you’d lose over 10 or 15 years.

So, don’t discount those *seemingly* small investment fees.  Even 1% can have you paying tens (or even hundreds) of thousands of dollars to your investment firm.

Here are a few ways to keep investment fees low:

  • Choose low-cost index funds from firms that have management fees of 0.20% or less
  • Consider a computer-driven service (also known as a “robo-advisor”) like Betterment or Wealthfront to minimize sales charges and management fees
  • Hire a certified financial planner who charges either an hourly or flat rate, rather than a percent of the fund
  • Use established online brokerages (like TD Ameritrade, Charles Schwab, and Etrade) to avoid maintenance fees

>>Downsize and simplify

If you’re running late to the retirement planning game, you’re racing against the clock.

However, if you’re open to living a frugal and simple life after you stop working, you won’t have to run so fast.

Your biggest priority is saving enough to cover shelter, food, insurance, and other basic necessities.  Everything else is optional.

Here are a few ways you could stretch your retirement dollars by simplifying:

  • Sell your 3-bedroom home and live in a 1-bedroom condo
  • Move from a large, expensive city to a small, lower-cost neighborhood
  • Choose to live without a vehicle and use public transportation instead
  • Focus on local travel rather than international vacations
  • Eliminate memberships and subscriptions
  • Declutter by selling items you don’t use
  • Learn to enjoy free entertainment options

Having a content and satisfying life in retirement depends more on your mindset than your circumstances.

If you’ve always had your heart set on living in your dream home and going on extravagant vacations in your retirement years, it might be time for a reality check.

You might need to start adjusting your expectations, and get accustomed to the idea of living more simply in retirement.

7. Extend your retirement target date

If you’ve delayed saving for retirement, one option to catch up with savings is to also delay your retirement date.

Working past your preferred target date can give you more time to build savings, and more time for those savings to grow.

Besides, having a full-time career until the age of 65 and then suddenly retiring from the workplace can create some negative consequences.  Many retirees experience depression and lack of purpose once they’re at home all day, so they decide to return to work for a few more years.

This “semi-retirement” allows for an easier transition, which many older people take between their 50s and late 70s.  (This depends, of course, on the condition of your health.)

But, it also gives you more income so you can rely less on savings.

Below are a few reasons why you should delay retirement:

  • The extra income will help stretch your retirement savings
  • You’re in good health and want to remain active, physically and mentally
  • You’ve always wanted to explore a different career
  • You’re not a homebody, and you like to be social
  • Your mental health benefits from a regular routine

Continuing to work into your late 60s and 70s is a great way to support the lifestyle you want in your golden years.  As long as your health permits, having a job to keep you busy and engaged with others can give you a sense of purpose and usefulness as you get older.

Don’t forget to grab your FREE Retirement Planning mini-workbook!  Make a plan to turn your dream retirement into a reality.


There is hope!

If retirement feels closer than you’re prepared for, take heart.

You still have options to get on track and retire with financial security.

However, it’s important to start *now* – so take the 7 steps outlined above and create a plan that will allow you to start building your savings.

If you’re willing to take focused action, make some lifestyle adjustments, and be willing to find opportunities to generate more income, you can achieve a comfortable retirement.

This is the time to buckle down and make those tough decisions about what to sacrifice now for the sake of your future.  Nobody knows what tomorrow brings – a job loss, a health scare, a lawsuit – so start preparing today.

Giving up and giving in to limiting beliefs will only keep you where you’re at, and it will never get you where you want to go.  Let your past mistakes go, and get focused on what’s ahead.

Take back control and take a stand for your future self.

There’ll never be a better time to start than today!

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Saving tips for late starters

Retirement Planning For Late Starters (7 Practical Steps That Work)

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