Retirement Strategies for Late Starters

Most retirement strategies work under the assumption that you have plenty of time to invest before retirement. However, if you get a late start on saving for retirement, there are some strategies that you can use as well. Here are a few retirement strategies to consider if you are a late starter.

Increase the Savings

That you are arriving to the party late does not mean that you cannot save for retirement. In fact, during this period, you need to amp up your savings to a new level. Many people try to save at least 10 percent of their income during their working years for retirement. However, if you are starting late in life, you will want to try to save significantly more than that. Bump up the percentage to 20 to 30 percent of your income if possible. If you can save more than that, you should definitely consider it. In order to make up for lost time, you need to save every penny that you can for retirement. Most retirement accounts will allow you to start saving more money once you reach the age of 50. For example, with an IRA, you can increase your contributions from $5000 per year to $6000. With a 401(k), you can increase from $16,500 to $22,500 per year. 

Lower the Risk

Since you are starting late, you might be tempted to put your money into investments that might bring in a substantial amount of return in a short period of time. However, this is not going to be the best approach in most cases. As you get older, you need to minimize the amount of risk that you subject your money to. All you have to do is watch the news during a down period in the stock market to see all of the devastation that it can cause to retirees. Therefore, you want to choose safer investments, such as bonds and low-risk mutual funds, in order to bring in a return without risking your retirement dollars. If you were to lose your investment money now, you would not have any time to make up for it later.

Reverse Mortgage

Once you reach the age of 62, you should definitely consider getting a reverse mortgage. This can be a great way to create a regular source of income without any risk of losing money in an investment market. With a reverse mortgage, a lender will pay you a monthly mortgage payment. You are also free to live in your house until you die if you wish. Once the lender pays off the house, you do not have to move out or sell the house. Therefore, if you own your home, and you plan on being in it for the rest of your life, a reverse mortgage makes a lot of sense. It can provide you with a nice supplement to Social Security and any other investment income that you might have.

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