Saving for retirement in your 50s

This is part 4 in a five-part series on saving for retirement at any age. Check in next Tuesday for information on retirement savings in your 60s.

Americans in their 50s only have a decade-plus to get their ducks in a row before retirement. Their retirement date is fast approaching, and many 50-somethings are facing the reality that their savings are insufficient. According to the National Institute on Retirement Security, those who are nearing retirement age and have retirement savings have accumulated an average of around $100,000. Over one-third have no retirement savings at all, and the average retirement savings of all Americans aged 55+ is only $12,000.

Although those numbers are scary, it’s not too late to bump up your retirement savings to where it needs to be. Below are a few tips on ways to catch up.

College days over?

If you are a parent, your kids may be out of college or graduating in the next few years. That means that the money that you’ve been paying toward their education can now be dedicated to retirement savings. And if you cut back on your own non-essential spending to help them through their college years, think about keeping your personal spending levels at that same reduced rate after they graduate so that you can maximize your retirement savings.

Mortgage free?

If you bought a house in your 20s, your mortgage may be likely paid off or about to be paid off. Once you are free of your mortgage payments, don’t just start spending that money on travel or other luxuries. Instead, put the amount of your now-paid-off mortgage payments into your retirement accounts. You won’t feel any additional “pinch” in your wallet, because you’re accustomed to that amount being spent on your mortgage each month.

Time to downsize?

After your children move out, consider downsizing to a smaller house or a condo that would be more economical and allow you to save more toward your retirement. Although the depressed housing market has led many Americans to hold onto their home the last few years, home prices have recovered significantly in many areas of the country, so this may be a good time for you to investigate the option of selling your larger family home, moving to a smaller dwelling and dedicating the savings to your retirement accounts.

Do you have 401(k) accounts from old jobs?

As you near retirement, it makes more sense than ever to consolidate the retirement accounts you have from previous employers. In addition to simplifying the tracking of how much money you have and where it is invested, having a single fund makes it easier to keep your portfolio balanced. According to Kiplinger’s magazine, consolidating your so-called “orphaned” 401(k) plans makes it easier once you start taking withdrawals/disbursements from the account, and may even lower the cost of your investment fees in the interim (depending, of course, on the fees charged by the old and new accounts).

Time to play catch up?

Starting the year you turn 50, the IRS allows you to make “catch-up contributions” into the tax-advantaged retirement accounts for which you are eligible to contribute. That means if you have a workplace 401(k), you can contribute an additional $6,000 each year on top of the $18,000 maximum for people under age 50. IRA catch-up limits allow you to contribute an additional $500 on top of the $5,500 amount allowed for younger taxpayers. So if you are frugal and a good saver – with the benefit of the funds available from paid-off mortgages or freedom from tuition bills as described above – and you max out both types of accounts, you could contribute up to $30,000 into your tax-advantaged accounts each year. That will enable you to catch up with your peers to have a safer, more secure retirement.