For many people in their 50s, the thought of not having enough saved for retirement can be stressful. While it’s true that you have less time to accumulate wealth than you did in your 30s or 40s, the good news is that it’s not too late. By taking decisive steps now, you can still catch up on your retirement savings and secure your financial future. Here are three essential tips to help you make the most of the time you have left.
1. Maximize Your Catch-Up Contributions
Once you hit 50, you’re eligible to make catch-up contributions to your retirement accounts. This allows you to contribute more than the standard limit to your 401(k) and IRA, which can help you close the gap in your retirement savings. In 2023, you can contribute an extra $7,500 to your 401(k), for a total of $30,000 per year
Kiplinger.com. Similarly, you can contribute an additional $1,000 to your IRA, bringing the annual total to $7,500.
These extra contributions not only help boost your retirement nest egg but also offer tax advantages, as they reduce your taxable income for the year. By maximizing your catch-up contributions, you can accelerate your savings and take full advantage of tax-deferred growth.
2. Delay Social Security
One of the most effective strategies for increasing your retirement income is to delay claiming Social Security benefits. While you can start claiming benefits as early as age 62, waiting until age 70 can result in significantly higher monthly payments. According to AARP, delaying Social Security increases your benefits by 8% per year after full retirement age (which is 66 or 67, depending on when you were born).
For many, this strategy can make a substantial difference, especially if you’re worried about outliving your savings. The longer you wait, the larger your monthly payments will be, providing a more secure income stream throughout your retirement.
3. Consider Diversifying into Real Estate or P.M.L.
If you’re concerned about catching up on savings through traditional investments alone, it may be time to consider alternative income streams, such as real estate or Private Money Lending (P.M.L.). Real estate, through rental properties, can provide consistent monthly income that can complement your Social Security and 401(k) withdrawals. Moreover, real estate values tend to appreciate over time, making it a potentially lucrative long-term investment
Private Money Lending (P.M.L.) offers another way to generate passive income. By lending money secured by real estate, you can receive monthly interest payments through promissory notes. This can be an excellent way to create a steady income stream while protecting your capital. As highlighted by NerdWallet, real estate and P.M.L. are strong diversification strategies that can help protect your savings from stock market volatility.
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