No Savings for Retirement at 50? 3 Steps to Get on Track

Being in your 50s and having no savings for retirement isn’t beneficial, but there is still enough time to start. It certainly will be challenging, but with these three steps and some explanations, it will be more accessible.

We want to support the beginning of your retirement journey, so in this article, we will talk about:

  • Reasons why people end up with no retirement savings;
  • What is the difference between savings in your 20s and 50s;
  • Actions you can take to ensure your financial future;

The best time to start saving is today, so keep reading this article to get all information you need to start!

Image Source

Why Don’t People Have a Retirement Plan?

We don’t learn about personal finance in school, and starting your own research is overwhelming for most people. People have common reasons for not having a retirement plan, and we will go through each one because it’s necessary to stop that phenomenon.

”It’s too Early.”

Honestly, there is no such thing as starting to save too early. When you get older, you will probably have a more significant income, but you will have to put in more money each month and less time for your money to make interest.

If you want to retire correctly, without worrying about your stability, it’s never too soon to start saving. Many people start in their twenties, and we encourage you to start saving early.

”It’s too Late.”

Many people just give up when they hit the retirement age without retirement savings and retirement plans, thinking it’s too late. There are many ways to develop your income strategy and improve your financial situation. Consulting financial professionals may be an excellent choice to see what available options are out there.

”It’s Expensive to Start”

There is no doubt that retirement savings raise your monthly expenses. However, starting small is better than doing nothing at all. If your bills payment is less than your monthly payments, you have money to start. For some people is hard to set some cash aside whatever their income is. Achieving your financial goals requires discipline and consistency. The sooner you start practicing paying yourself first, the easier it will get and with better results.

”Don’t Have Enough Money.”

This is connected with the reasons mentioned above – many people claim that they cannot save for the future because they are overwhelmed with current expenses. It’s true, but unfortunately, there always will be current expenses in the future. Consider trying other budget methods – incremental budgeting, activity-based budgeting, zero-based budgeting, or the 50/30/20 rule.

”I Don’t Need to.”

Usually, people with this attitude presume that their savings are enough for the age you retire. We have to change this mindset as soon as possible because we witness price rises and inflation. Money value is constantly changing, and the amount on your saving account will not be the same in 10 or 20 years. A plan to retire can help you with inflated costs and unexpected events. Besides that, retirement planning can save you from working during your old age and financial instability for you and your family.

”I Don’t Know How.”

Even people who want to be financial advisors have to research and learn continuously. Knowledge isn’t something that just happens to people. The same occurs for regular people who just want to figure out their financial plan. Don’t think research is something unachievable because it is not. Many people did everything (or almost everything) on their own. On the other hand, if you are not willing to take time for research, you can always call a professional for help.

Difference Between Starting in Your 20s or 30s and 50s

The difference between starting saving early and when you are older might seem more substantial than it is.

The most significant disadvantage of starting own retirement savings in older years is having less time and not being able for early retirement. Other than that, the whole process is the same.

Being in your 50s also has some advantages – you probably hit the most significant income in this stage. For most workers, their 50s are the time when they earn the highest annual income. You can use the free cash flow to get a comfortable retirement, and we will show you how.

Establish Your Free Cash Flow

This is the first of three steps in creating your retirement plan.

Free Cash Flow is the amount of money you have after paying all of your monthly bills.

Image Source

When it comes to prioritizing our cash flow, the best first move is to research the available programs. Often is available our retirement accounts – Roth IRA or 401 (k) plan.

Roth IRA

One form of Individual Retirement Account (IRA) allows you to withdraw money tax-free if certain conditions are fulfilled. Individual accounts imply that you can open an account without requiring your entrepreneur to do so. Because it’s directed to you and not your firm, the Roth IRAs will follow you whenever you change the job. The financial adviser and bank can help you set up your individual retirement accounts.

The Roth IRA is a similar but better option than a traditional IRA because its contributions do not allow you to reduce your taxable income. Still, when you reach full retirement age, your withdrawals will be tax-free. Imagine it like paying interest on your seeds rather than on the harvest. Thus, you’re helping your future self; you won’t pay any taxes on retirement income when you are fully retired.

Unlike traditional IRAs and 401(k), you don’t have the required minimum contribution during account holders’ lifetime.

401(k) Plan

On the other hand, we have a 401(k) plan, a retirement plan that the employer offers. The employees commit to payroll deductions to save money for their golden years. These types of retirement accounts are tax-deferred, meaning you will not pay income taxes for the assets you put in it until you get the retirement income. If we mention our allegory from earlier, with 401 (k), you are paying taxes on your harvest – that is a substantial disadvantage of this plan. Once you start withdrawing from your 401(k), your withdrawals are taxed as ordinary income tax.

Since both most common types of retirement accounts have their drawbacks, it’s great news that you can combine both if you hold them in separate accounts and as long as the total amount does not exceed the annual maximum.

Unfortunately, we can always put a certain amount of money towards our retirement account, which is not enough. With only this plan, you might not be able to pay necessary retirement expenses. Luckily, there are other options you can choose from.

Put Your Money into Whole Life Insurance Policy

Firstly, you don’t have the maximum amount of money you can put into this account, and that is something we want when we are running late with our retirement savings. The bonus is that it is after-taxable income. Thus, whole life insurance is very similar to Roth, without maximum limitation.

You can think of a whole life insurance policy as a storage facility where you can earn a guaranteed rate of return and the opportunities for us to be able to invest.

Money should be always be moving, and in this way, you can earn interest in two places at the same time. You can grow your cash value while having life insurance and death benefit are just a plus.

Even if you already have tens of thousands of dollars for savings, you can start building family wealth that your children and their children can continue. Unfortunately, many people use this as a scam, don’t fall for it. Only appropriately appointed licensed professionals and financial advisors can offer and sell you these products and services referenced.

There is always the other side of the coin. If you’re 50 or over 50 years old, the insurance cost will be more than for someone starting in their 20s.

We covered this in detail in our “50 Years Old & NOTHING SAVED FOR RETIREMENT” video.

Start Investing

This field gives you a lot of flexibility – from investing in stock, bonds, real estate, cryptocurrencies, precious metals, or any other investment vehicle. We can spend a lot of words giving reasons for starting investing, but it’s enough to paraphrase Ben Franklin’s thought: Your money will make money (when investing).

In existing numbers, it will be like this: if you invest $1000 this year, and your investment returns are 10%, meaning you earned $100, or the total return of $1100. Even if you don’t contribute anything next year, the money you already have will earn compound interest.

When choosing different types of investments to use, look toward target-date funds, which allocate a portfolio to an expected retirement date. There is no universal, one-size-fits-all strategy to follow to buy or sell securities. You need to become an expert financial planner to succeed.

We often hear people have a fear of investing due to risks. Let’s shatter that illusion.

You should never have to take a risk. If you do your research, risk tolerance is no such thing. Taking a risk usually means that some gap exists – either a gap in education or an actual deal. It is always some gap. When investing, you always need to know what the expectations are and which exit strategy you will use if needed. Don’t consent to anything less than no risks.

With whole life insurance and investments, you will be able to make double-digit returns and be right on track with the plan to retire.

Image Source

Other Things to Consider

We have some extra tips for you.

Repay Your Debts

Nobody wants to be 65 years old with loans and credit card debt. The debts will hold you back from investing and saving for yourself and your family. Make it a priority to pay down all of your loans and enjoy your retirement debt-free. Repay off your debts as quickly as possible and start planning to buy a cottage you always wanted or trip with your grandsons to Disneyland.

Max Out Your Contributions

We already mentioned the possibility of having a retirement plan at work. If so, contribute to that account to get the maximum match. James Shagawat, a CFP in Paramus, New Jersey, says: ”You can contribute up to $26 000 if you are 50 or over.”

Necessarily ask your firm if it has additional retirement savings plans available.

One note: if your employer matches with company stock, you have to be careful and have other accounts and plans. People in the firm that matches with company stock may become subject to ”concentration risk”. There are researches about participants who got their employer match as company stock and end up with half, or more than half of loss.

That problem has a solution too. You can balance that contribution to a Roth IRA with diversified investments.

Plan For Emergencies

Be sure to not forget about your emergency fund during your run to retire. You can build your emergency account by depositing raises or bonuses you receive. Instead of spending that extra money, you will improve your savings rate to 30% (or even more) and feel like you got free money. After a few years of steady pay increases, you will see a huge difference. Don’t allow yourself to be in a situation of unexpected expenses and reach into your retirement account.

Consider Downsizing

If you want to retire quickly, cutting down, housing expenses can help you reduce your total costs and help you provide a better financial cushion. This consideration applies to moving to a smaller home or moving out of pricier cities like New York City, Los Angeles, or San Francisco.

Think about tax breaks if you decide to move out. Some states have zero or minimum income tax rates, don’t overlook them. Texas, South Dakota, and Nevada are some states that do not have a state income tax.

Many older people choose the reverse mortgage, which is also a financial vehicle invented to cater to the needs of aging American homeowners. It is also a loan, so skip it if you can make it another way.

Eliminating car payments or cable TV bills is one example you can consider due to downsizing.

Social Security Benefits

Social Security benefits are payments made to qualified retirees and disabled people and their spouses and children. Individuals can qualify if they were paying into the Social Security program during their working years and accrue 40 credits. The amount of benefit someone receives depends on their earnings history and the age when they started to claim Social Security. Benefits are determined by a specific set of criteria issued by the Social Security Administration (SSA). Please consult with a tax advisor, or legal advisor, to give you more detail because everyone has individual circumstances.

Delay Retirement

Consider a way to make money coming by taking a part-time job, freelancing, or leveraging your skills and experience to augment your savings. With $50,000 in a retirement account and will to retire at age 65 with a $50,000/yr retirement income, you should have to save about $2,400 a month. The assumption is that the interest rate of growth is 8%. Of course, if you extend it and retire at the age of 70, it will decrease those savings down to $1,280 a month.

People who retire early, in their 50s, have to plan for higher health care costs than people who work in later years. Health care costs include everything from health insurance premiums and deductibles to prescriptions and other out-of-pocket expenses.

Other Retirement Assets

Besides the 401 k and the Roth IRA, the most common types of retirement accounts:

  •  Traditional IRA
  •  SEP IRA
  •  Simple IRA and Simple 401k

Traditional IRAs pros are available to anyone, and it offers many different plans and investment choices. The con is low contribution limits and great possibility for tax savings, so it might not be the best option if you start your journey to retire a little late.

SEP IRA has high contribution limits and immediate vesting, so it is usually a choice for small-business owners and self-employed people.

If you own a small business, another great option to consider is the Simple IRA – easy to set up, and contributions are either matched or guaranteed for employees. On the other hand, contributions are lower than SEP IRA or 401 k.

Image source

The Infinite Banking Concept

A Whole Life Insurance Policy has enough advantages to choose it as a strategic method on its own, but in combination with the Infinite Banking Concept, it is unbeatable.

The Infinite Banking Concept, or over-funded life insurance, uses whole life insurance to finance you as you would normally do through a bank. It allows you to imitate how the traditional bank works; you are that bank now. You won’t depend on a third party anymore.

With over-funded life insurance, you will borrow money against yourself and guide the cash flow during your cash value insurance earn dividends.

The main course is to achieve financial freedom and build wealth while borrowing and repaying the money held in your insurance policy’s cash value account.

Final Thoughts

Setting out and planning out your retirement doesn’t need to be bothering you, even if you are starting a little bit late. We hope that this article helped you understand where to create and how to achieve your savings goals.

The gist is to bring you closer to the idea of over-funded life insurance. With a whole life insurance policy, you can plan to retire and build wealth, whether you are in your 20s and want to retire early or in your 50s, with no retirement savings and idea where to start.