48 Years Old And Nothing Saved For Retirement
CNN/Stylemagazine.com Newswire | 6/22/2016, 8:08 a.m.
I'm 48 years old, have always worked, but none of my employers offered a retirement plan. So I have nothing saved for retirement. Is there any hope for me at this point? --M.A.
Sure, there's always hope. But how much depends on how willing you are to make a concerted effort to improve your retirement prospects over the next 20 or so years. That's not to say you can get yourself to where you would have been had you been planning for retirement since the beginning of your career. But if you make retirement planning a top priority in the time you have left in the workforce, you should at least be able to recoup some lost ground. And you'll certainly be able to retire in better shape than if you do nothing.
That said, let's not sugar coat this. By virtually any standard you are far behind. According Vanguard's recently released "How America Saves 2016" report, the average account balance for the 401(k) plans Vanguard oversees is just over $96,000. For people in your age group (45 to 54), it's even higher, roughly $116,000.
And based on benchmarks Your Money Ratios author and financial planner Charles Farrell has calculated, someone your age should have savings equal to roughly five times annual salary to be on track toward replacing 70% to 80% of pre-retirement income after retiring. So if you earn, say, $60,000 a year, that means you should have roughly $300,000 already set aside to be on track.
But enough of where you should be. Let's talk about ways to get you where you want to be, that is, in a position where a reasonably secure retirement is at least a possibility.
There's no magic bullet here. No "Make Up For 20 Years of Not Saving" mutual fund that will generate blockbuster gains and power you to a big fat nest egg. If you're going to have any shot at turning your situation around, you're going to have to do something that you clearly haven't done to date: save. As much as you can. Starting right now.
It won't be easy. You've been living on 100% of your income (minus whatever the IRS and other tax authorities siphon off). So this is going to require a dramatic change in your lifestyle. But there are a variety of techniques that can make you a better saver -- including these 10 tips to supercharge your savings -- provided you're willing to follow them.
If you're not willing to make the transition from a spender to saver, then in the absence of rich, accommodating relatives or hitting the lottery, you'll have to reconcile yourself to living on Social Security, which, with an average benefit for retired workers of just over $16,000 a year, will barely cover the basics.
Normally, I recommend that people shoot for a target savings rate of 15% of annual salary. But given how far behind you are, you really ought to push for 20%, if not more. If that's just not possible immediately, try starting at 15% and increasing that amount by a percentage point a year. Saving at that rate starting this late in life isn't going to get you to where you would have been if you'd been saving diligently your entire career. But you can accumulate a pretty impressive stash.