Take-Aways and Strategies for Late Retirement Savers

 

I recently attended a webinar about people who get a late start saving for retirement. Below are some key takeaways and catch-up strategies that were shared:

Late Saver Definition- Someone who feels behind on reaching financial independence for retirement, compared to “normal” savings metrics. Late savings is not based on age or a number but on how people feel about their financial progress.

 

Savers’ Starting Age- The average age of starting to save for retirement is age 32 and 58 to 60% of Americans say they are behind on retirement savings. Americans age 45 to 54 have an average savings balance of $115,000. The biggest lever that late savers have is their savings rate.

 

Waking Up- There are a number of wake up calls that cause people to start planning for retirement including workplace seminars, becoming a parent, health events, divorce, layoffs, feeling stuck, and seeing others start to save significant sums.

 

Catch-Up Time- People can be very hard themselves after they “wake up” to their lack of retirement savings, often lamenting the fact that they hadn’t started saving earlier. In reality, catching up is not impossible. It often takes about 10 to 15 years to catch up to early savers once a late starter wakes up.

 

Reasons for a Late Start- Commonly cited obstacles to saving early (20s) include: raising a family and child care expenses, student loan payments, lack of financial education, a low-income job, a belief that staying in debt is normal, and unhealthy money beliefs (e.g., “investing is a scam”).

 

Disadvantages of Starting Late- Less time for compound interest growth, some people take on too much investment risk due to a shorter time horizon, and some people experience career burnout but feel they must work longer to catch up on savings.

 

Late Start “Superpowers”- Things that can help late savers accumulate more savings include catch-up contributions on retirement savings accounts and HSAs, peak earning years in your 40s through 60s, being beyond the financial challenges of early adulthood, and decisions such as downsizing.

 

Long-Time Horizon- Your investment time horizon is the rest of your life…not your retirement date.  This means that, if you are 45 years old today and live to age 90, you have 45 years for your money to grow via compound interest.  Long time frames may also reduce market volatility.

There is a popular saying about taking responsibility for one’s actions: “If it is to be, it is up to me.”  Workers are increasingly “on their own” to prepare for retirement as government and employer supports (e.g., defined benefit pensions and retiree health insurance) have eroded  over time. 

Personal responsibility includes making the decision to save for retirement, as well as deciding how much to save, and determining a personal investment asset allocation policy (i.e., the percentage of invested funds placed in stocks, bonds, and cash equivalent assets).

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.