While experts generally recommend that retirement planning should begin as early as possible, it’s never too late to start saving. But a recent confluence of factors, including inflation, rising interest rates, and the resumption of student loan repayments, has made saving for retirement a challenge for many Americans.
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But experts say that with planning and discipline, there are steps you can take to retire by 65, even if you start investing in your 50s.
“If you’re in your 50s, retirement is right around the corner,” says Steve Sexton, founder and president of Sexton Advisory Group. “That means increasing your retirement savings and investments and minimizing your debt should be your top financial priorities. While everyone’s financial situation is different, here are some things you should prioritize in your 50s.”
Here are some steps recommended by experts:
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1. If you have a 401(k), contribute the maximum
If possible, Sexton says you should contribute the maximum amount to your 401(k) every year until you retire, especially if your employer offers a contribution match.
He says this is an easy way to responsibly invest your retirement money, and it also allows you to defer paying taxes on this income until you withdraw the funds, freeing up additional funds now to allocate to other investment avenues or to pay off current debts.
2. Reevaluate your 401(k) allocations
Another important step, Sexton said, is to reevaluate your 401(k) allocation. In fact, it’s generally recommended to take a more conservative approach as you get closer to retirement.
“The mutual funds you invested in your 401(k) plan in your 20s or 30s will be different than the ones you invest in when you’re in your 50s,” he says. “Consider whether your 401(k) plan offers target-date funds, which automatically adjust your asset allocation to coincide with your target retirement year.”
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3. Put money into an IRA
Similarly, Sexton recommends putting the maximum amount of money into an IRA each year until you retire.
He explains that if you’re over 50, the maximum amount you can contribute to an IRA in 2024 is $8,000.
Doing so can help boost your retirement investments and savings, Sexton said. “If you haven’t actively contributed the maximum amount before, now is the time to do so,” he added.
4. Evaluate social security benefits
Your 50s is also a good time to find out what your Social Security benefits will be.
“There are plenty of reliable online calculators that can help you determine how much Social Security you’ll receive each month,” Sexton says. The longer you can defer claiming your Social Security benefits, the more you’ll likely receive in the long run, so you should factor this into your financial retirement planning, he adds.
Melissa Murphy Pavone, CFP, CDFA, investment director at Oppenheimer & Co., echoed similar sentiments, adding that consulting a CFP can provide personalized advice to help retirees make important decisions like when to take Social Security.
If you’re in pre-retirement, she says, a CFP can create a Social Security optimization strategy for you: “Given that you’re likely to live longer, the decision of when to claim your Social Security benefits becomes more important than ever.”
5. Learn to spend money wisely
Of course, saving quickly in the short term may require you to adopt certain financial habits, like budgeting, living within your means, and paying off debt.
“This is important for retiring by age 65,” Sexton says. “If you’ve fallen behind on your retirement investments, you may want to consider more aggressive savings strategies, such as downsizing, moving to a less expensive state, or taking on a second or second job.”
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This article originally appeared on GOBankingRates.com: Started Investing in My 50s: 5 Things I Did to Retire by 65
