Let’s face, life is busy and sometimes we just can’t find the time to begin investing while we’re in our youth. It’s true that the younger you start investing, the more time you have for your investments to grow. But, according to reports from the US Government Accountability Office, approximately 48% of Americans over 55 years of age have absolutely no savings in a retirement plan. If you’re one of them, you’re certainly not alone. However, as you grow older with little or nothing saved, your dreams of a sunny retirement can begin to fade. Looking towards retirement can become more dreadful rather than exciting. But there are several strategies to take control and get on track for a decent retirement. However, the important question is that if you’ve arrived late to the game, what’s the best way to begin investing?
4 Tips to Start Investing When You’re Older
Make Catch-Up Contributions
The foremost way to overcome the shortcomings in your savings is by making catch-up contributions to tax-friendly retirement accounts. The IRS allows individuals over 50 years of age to put an additional $6500 a year into their 401(k) account over and above the normal $19500 contribution limit. Besides this, you can also contribute $1000 annually to an IRA over and above the $6000 limit. Although the amount of contribution may seem huge, catch-up contributions can significantly improve your retirement prospects. Moreover, considering that you are in your peak earning years, this should not be very difficult.
Cut Down Your Expenses
An average American spends close to $165 per day for gas, groceries, and other expenses such as eating out. However, if you’ve not invested enough for a comfortable retirement, it may be best to slash your expenses so that you can ramp up your savings and begin investing more of your income. Cutting back on extravagant dinners and expensive vacations during the years before retirement, for instance, can come a long way in making retirement more affordable and enjoyable.
Invest in Healthcare
An average, healthy 65-year old couple pays close to $390,000 towards healthcare throughout their retirement. And this does not even include long-term care. This is why it is crucial to set aside funds especially for future healthcare. So make the most of your Health Savings Account (HSA). You can invest up to $3550 as an individual, or $7100 for your family, into this account. What’s more, these contributions are completely tax-free, and can also be withdrawn tax-free for medical expenses that qualify. Moreover, you can use HSA funds to pay for premiums, deductibles, and prescriptions.
Get a Financial Advisor
Instead of allowing yourself to be weighed down by the challenge ahead, seek the help of a financial advisor. A good financial advisor will be able to create and customize a healthy financial plan for your needs. This advisor will arrive at an accurate target number for your retirement savings and devise a realistic plan to help you achieve it.
Starting late doesn’t mean you can’t catch up. It only means that you have to make extra contributions to your retirement. You may feel like you are far behind and will never be able to retire comfortably. But the only way forward is to take action. Commit yourself to your goals and start investing right away. Remember, it’s never too late.