Many Americans in their 50s are approaching retirement age but have not saved enough for their post-work years. According to Fidelity Investments, by the time you reach your 50s, you should ideally have around six times your salary saved for retirement. However, many people in this age range have less than half of that amount in their 401(k) accounts. The median 401(k) account balance for Americans in their 50s is $60,900, with the average account balance being $199,500. Many people in their 50s may have missed out on recent changes to the 401(k) system that have benefited younger workers, such as auto-enrollment and auto-escalation.
One reason many Americans in their 50s fall short on retirement savings is due to not benefiting from recent changes to the 401(k) system. Anne Lester, a retirement expert, explains that older workers were well into their careers by the time changes like auto-enrollment and auto-escalation became widely adopted. However, people in their 50s have the highest savings rate among all age cohorts, putting around 13% of their income towards retirement savings inclusive of employer matches, just shy of Fidelity’s recommended 15%. This shows that Americans in their 50s are making an effort to catch up on their retirement savings, despite starting later.
If you are in your 50s and feel behind on your retirement savings, there are a few options available to help you get back on track. One option is to make catch-up contributions to your retirement savings plans. Americans 50 and older can contribute extra funds to their 401(k) or traditional and Roth IRAs. Another option is to delay retirement, allowing your savings more time to grow. Working longer also means you need a lower level of savings to last because your retirement is shorter. Additionally, waiting to receive Social Security benefits until later can lead to a higher guaranteed income in retirement.
However, not everyone can or wants to delay their retirement. If that is the case, you may need to find ways to live on less money during your post-work years. Understanding how much money you will have in retirement and figuring out how to reduce your spending can be beneficial. It may be helpful to research moving to areas with a lower cost of living or cutting certain discretionary expenses ahead of time. By mentally preparing for a reduced income in retirement, the adjustment may be less painful when the time comes.
Overall, Americans in their 50s need to assess their retirement savings and make adjustments if needed to ensure they have enough money to support themselves in retirement. By taking advantage of catch-up contributions, considering delaying retirement, and finding ways to reduce spending, individuals in their 50s can work towards building a secure financial future. Planning ahead and making strategic decisions can help alleviate financial stress during retirement and allow individuals to enjoy their post-work years with peace of mind.
