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Dear Penny, I Am 54 Years Old And I Have No Pension Plan. How Do I Start

Dear Penny, I am 54 years old and I have no pension plan. How do i start

Dear Penny,

I have just turned 54. I never had any retirement plans except to save money where I could. I have about $ 30,000 in a savings account that really doesn’t do anything.

Any suggestions would be great.


Dear E.,

Investment firms create fancy charts that tell you how much you should have saved at a given age. According to the charts, a person in their mid-50s should have five to eight times their annual earnings in a retirement account.

But Chartland is a perfect world. Here we all save for retirement at the age of 22, our wages and the stock market keep growing and we always have access to a 401 (k) with an employer match.

Then there is the real world.

A 2016 report from the Government Accountability Office found that 29% of households headed by those over 55 did not have a retirement plan or a defined benefit plan such as a pension.

Unfortunately, their location is widespread. But you still have options that can make your retirement years a lot more comfortable.

Let’s start with the obvious: if you have access to a 401 (k), enrolling on your employer’s plan and taking advantage of all matches is a must. You can contribute up to $ 25,000 in 2019 because you are over 50 years old. For workers under the age of 50, the limit is $ 19,000.

But let’s face it: a lot of people don’t save up for retirement because they don’t have access to an employer-sponsored plan.

Since you have $ 30,000 in your savings account, I suggest opening a Roth IRA statistic. (Seriously, like once you’ve finished this column.)

The maximum you can open and fund a Roth IRA if you have taxable income that does not exceed $ 122,000 per year, or $ 193,000 if you are married. You can easily open one online. Since it sounds like you’re new to investing, consider a robo-advisor who will choose investments for you based on your goals.

First, invest USD 7,000 in your account. This is the maximum amount for 2019 that anyone over 50 can contribute to an IRA. Then make it a priority to fund it to the maximum each year.

If you contribute $ 7,000 every now and then and then keep investing $ 7,000 through the ages of 70, you have saved nearly $ 200,000 on an average annual return of 6%. It certainly won’t give you a comfortable retirement, but it will make things easier.

The great thing about a Roth IRA is that it is funded with money that you have already paid taxes on. So you don’t owe any tax if you withdraw them later.

So now you have $ 23,000. You should allow about three months of living expenses as an emergency savings.

On top of that, if you have money to spare, using it to pay off debt is one of the best investments you can make. Your retirement will be much more comfortable with no mortgage or consumer debt.

However, if you are out of debt, you can open a taxable investment account to get more retirement assets.

You should also plan to wait as long as possible to claim Social Security. If you take out social security when you are 62, your benefit will be 30% lower than if you can wait until you are 67.

Ultimately, if you delay saving for retirement, you should plan to work longer and live on less. However, you have the option of building a nest egg even if you start late.

Robin Hartill is the Senior Editor at The Penny Hoarder and the voice behind Dear Penny. Send your questions about saving for retirement to [email protected]

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