Americans in their 50s are approaching retirement age but many do not have enough saved up for their post-work years. Fidelity Investments advises that by the time you reach your 50s, you should ideally have around six times your salary saved for retirement. For those earning $100,000 a year, this would amount to $600,000 saved. However, many individuals in their 50s have significantly less than this in their 401(k) accounts, with the median balance being $60,900 and the average balance at $199,500.
One reason many people in their 50s fall short in their retirement savings is because they did not have the benefit of recent changes to the 401(k) system. Younger workers have benefited from features like auto-enrollment and auto-escalation, which encourage higher participation rates and savings amounts. On the other hand, many older workers were well into their careers when these changes were introduced, resulting in lower participation rates. Despite this, individuals in their 50s have the highest savings rate among all age groups, putting around 13% of their income towards retirement savings.
For those in their 50s looking to get their retirement savings back on track, there are several options available. One option is to take advantage of catch-up contributions, allowing individuals 50 and older to make additional deposits to their retirement savings plans. Another strategy is to delay retirement, giving savings more time to grow and reducing the amount needed to last through retirement. Additionally, delaying Social Security benefits can result in a higher payout, providing more guaranteed income during retirement.
If delaying retirement is not feasible, individuals may need to adjust their expectations and plan to live on less money during retirement. This may involve reducing spending, moving to a lower cost of living area, or cutting discretionary expenses. Getting a clear picture of post-retirement income and expenses can help individuals make informed decisions about their financial future. By starting early and making incremental adjustments, the transition to living on a reduced income in retirement can be more manageable.
Overall, individuals in their 50s facing a shortfall in retirement savings have options available to improve their financial situation. By taking advantage of catch-up contributions, delaying retirement, and making strategic decisions about Social Security benefits and spending, it is possible to enhance retirement prospects even in later years. Planning ahead and making gradual changes can help individuals navigate potential financial challenges and achieve a more secure retirement.
