Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.
Today’s question is about building up retirement savings; specifically, what to do when retirement is near and you’ve got nearly nothing saved.
Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.
You also can learn how to send in a question of your own below.
For more information, check out “2-Minute Money Manager: How Can I Find Money to Save for Retirement?” and “The 7 Fastest Ways to Catch Up on Retirement Savings” You can also go to the search at the top of this page, put in the words “saving for retirement” and find plenty of information on just about everything relating to these topics.
Got a question of your own to ask? Scroll down past the transcript.
Don’t want to watch? Here’s what I said in the video
Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by Money Talks News, serving up the best in personal finance news and advice since 1991.
Today’s question comes from Jay:
“I’m 55 and have no retirement savings. What should I do?”
OK, Jay, here are some tips.
Re-examine your budget
If you’re not saving now, step one is to find money in your budget to apply toward savings. How do you do that? By examining where your money is going now.
One easy way to start tracking your spending is to use an app like YNAB (short for "You Need A Budget"). Or for step-by-step directions, check out “Resolutions 2019: Budget Your Way to Financial Goals.”
It’s only after examining your expenses that you’ll (hopefully) start finding extra cash you can use for savings. If you’re fast and loose with your money now, you’ll find plenty of leaks you can plug. But even if you’re a careful spender, a detailed look at where your money is going will allow you to make better decisions:
- Would you rather bring your lunch from home and retire sooner?
- Can you do without that premium cable package?
- Can you raise your insurance deductible and save some money?
Remember: Every little bit helps!
‘Catch up’ your 401(k)
Since Jay is over 50, he’s eligible for 401(k) “catch-up contributions.”
In 2019, most workers can stuff up to $19,000 into their 401(k) plans. But if you’re 50 or older, you can save an additional $6,000, or $25,000 total.
Also, if Jay is eligible for matching money from his employer, he’d better be investing enough to get that full match. An employer match is free money; that’s the best kind of money there is.
When you’re investing, be careful, but not overly conservative. The stock market has returned twice what bonds have over the long term, so you need some of your savings there.
Here’s your simple investing formula: 100 minus your age = percentage you put in a stock mutual fund.
For example, Jay is 55. 100 minus 55 = 45. Jay’s 401(k) or other long-term savings should be 45% invested in stocks.
Be smart with raises and windfalls
Into every life some money must fall. You inherit. You get a raise. You get a bonus. You get a tax refund. You find some lost money.
Whenever you get any additional funds from any source, that’s money you’re used to living without. Put it in your savings.
Make some snowballs
When you pay interest, you’re putting money into the pocket of a lender that should be in your pocket. Pay off your debts, then use money you freed up to increase your savings. Paying off an 18% credit card is like earning 18% on your savings, risk-free and tax-free.
Once you’ve paid off a debt and no longer have a monthly payment, use that previous payment to jack up your savings. You’re used to doing without that money, so you won’t miss it.
Check out “8 Surefire Ways to Get Rid of Debt ASAP” for more tips.
Amp up your earnings
There’s nothing that can turn your financial situation around faster than making more money. What’s the fastest way to do that? Ask for a raise. But do it correctly: See “10 Tips to Remember When Asking for a Raise.”
If that doesn’t work, maybe it’s time to find a higher-paying job. Not an easy alternative, but if you’re 55 with no savings, it’s time to pull out all the stops.
Finally, there are dozens of ways to make money these days that didn’t exist 10 years ago. Check out “107 Easy Ways to Make Extra Cash.”
Bottom line? If that light at the end of the tunnel is starting to look like a freight train coming your way, it’s time to get motivated. Find extra money. Make extra money. Invest extra money. Every little bit helps.
Lots of people have started late and still won the race. You can too!
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The questions I’m likeliest to answer are those that come from our members. You can learn how to become one here. Also, questions should be of interest to other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.
I founded Money Talks News in 1991. I’m a CPA, and I’ve also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.
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