Complete your emergency fund In a 2016 GoBankingRates survey, 33% of baby boomers aged 55 to 64 had no money stashed away in savings, while 36% had less than $1,000. That's why, regardless of age, you still need enough emergency savings to cover three to six months' worth of living expenses. Currently, anyone aged 50 and over can put up to $6,500 a year into an IRA and $24,000 a year into a 401(k). Even if you've been saving throughout your career, now's the perfect time to boost your retirement savings rate because, conceivably, you only have a few more years to fund your account. If you have a fully loaded emergency fund, and your IRA or 401(k) balance is healthy, it pays to pump some extra money into your mortgage so that it's paid off by the time you retire. This way, you'll be able to stretch your retirement income further once you do stop working. Get out of credit card debt Believe it or not, seniors aged 65 and over carry more than $6,300 of credit card debt on average -- and that type of debt can be a huge drain on your limited retirement income. In fact, Genworth's 2016 Cost of Care Survey estimates that it typically costs more than $43,000 a year to reside in an assisted living facility, and $82,000 a year or more to live in a nursing home. That's why it pays to sign up for long-term care insurance in your 50s, when it's cheapest to secure coverage. Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after.
“I’m 28, have a good job making $60,000 to $70,000 a year. I’ve been stashing anywhere between $200 to $500 per month into my savings account. I’ve been thinking about opening up an IRA or some type of investment account to put my money into since my job doesn’t offer a 401(k) or any retirement plans, but there are so many options I don’t even know where to begin. Any advice?” –Hector Rivas, Orlando
We get it. It’s tough to put away money for long-term needs when you’re young and trying to enjoy life. But Hector is smart to be focusing on his future, especially now that he has a well-paying job.
“In finances and in life, we all have to balance living well today while planning for a more secure future,” says Patrick Amey, certified financial planner at KHC Wealth Management.
Yes, a 401(k) plan is the go-to retirement savings account for most workers. But if you’re employed at a company that doesn’t offer a 401(k) or any other retirement plan, don’t worry. There are other options.
Here’s what the experts recommend:
1. Create an emergency fund first
The first step is to create an emergency fund that will cover three to six months of expenses, even before you start saving for retirement. It’s critical to set aside money in case you lose your job, or have some other unexpected expense like a medical bill or urgent home or car repair.
“The biggest financial mistake that I see people make is that they do not have an adequate emergency fund,” says Patrick Lach, investment adviser with Lach Financial.
Hector is doing the right thing by stashing away $200 to $500 per month into a regular savings account, and he should keep doing that until he has enough to cover his expenses for several months.
One way to make it easy is to have your paycheck divided between a checking and a savings account, explains Cynthia L. Turkington, certified financial planner and owner of Fair Trust Financial. Once your money goes into your checking account, set up an automatic payment to divert a portion into a savings account, before you have a chance to spend it.
2. Look to…