How to Retire After Getting a Late Start on Saving

retirement (Photo credit: 401(K) 2013)

Ideally, you would have started saving for retirement in your early 20s. In this case, by the time you were 50-years-old you would have had a decent amount put away with roughly 15 years left to add to this amount. Unfortunately, this is not reality for many people globally, but it is not the end of the world. The typical American household in the 55 to 64 age group has only accumulated enough in retirement assets to provide an additional $400 per month on top of social security, according to an article found in the USA Today, so you are definitely not alone.

Getting a late start does not have to mean the end of your retirement goals, as long as you make use of the time that you have left before the big day arrives. Despite what people may have told you, there is no right way to retire. It is a very individual thing, so come up with your own plan and stick to it.

Spend Less

Perhaps the greatest mistake that couples make once their children have finished university and their house is paid off is they start spending more money. This can include lavish vacations, new vehicles and remodeling the house. In fact, the USA Today reports that the average couple increases spending by 51% once the kids move out, which makes it very difficult to save.

Even spending $500 less per month until retirement and putting it into a 401K can give you an extra $600 per month after retirement, depending on your investments. That makes a huge difference when attempting to continue your current lifestyle when you are no longer working. 

Consider Your House an Asset

If you have purchased a house, this is probably your greatest asset. A large family house will bring you in a great deal of value and you can invest this money in your retirement savings. This will also reduce your monthly expenses since you will not have to pay for a large house.

Once the children move out, you do not have much use for a large house anyway, so it makes sense to get out and use the money for your eventual retirement goals. Unless you have made money saving renovations like adding solar panels or digging a well, your monthly bills will cost more than they are worth once you have an empty nest.

Plan to Keep Working

Those who do not have much money put into their retirement savings might want to consider working for a few additional years. Not only does this give you more money to put into your retirement savings, it also means a few less years of draining your retirement fund.

Many people choose to retire when they are feeling burnt out by their job. At this point, it might be a good idea to start a second career. This gives you the chance to work a new job for a few years, which will increase your retirement savings, while giving you the chance to experience something completely different.