by Gary Foreman

When you’re really late to the retirement planning game, you likely won’t live out your golden years traveling the world. But, if you take appropriate action now, you probably won’t end up among the 10% of retirees who live in poverty.

Dear Gary,
I am 53 and my husband is 60. We have managed to have our house nearly paid for, one car free and clear, the other will be paid off in two years. We have modest savings and some stocks ($30,000). It is unfortunate that both our careers were in industries that either made no provisions for retirement or went bankrupt leaving behind very small pensions. All the articles I have read are for people wisely planning for retirement early on. Can you give me some pointers for late comers such as myself and my husband? We truly have been unwise and are growing old too fast. What do you do when you’re really late to retirement planning?
Patricia in Miami, FL

Many of us don’t think about how we’re going to finance our retirement until a few gray hairs appear in the mirror. And the process of retirement planning has gotten harder. Patricia and her husband might not live into their 90’s. But just like any of us, they need to be prepared in case they do.

Steps You Should Take When You’re Really Late to the Retirement Planning Game

The basic problem that Patricia faces is obvious, and unfortunately, common. Many of us probably don’t have enough income to support a comfortable retirement. The question is: how much do you really need? Finding out will require estimating after-retirement income and expenses.

1. Estimate how much you’ll spend after retiring.

First, how much will you and your spouse spend after retiring? Traditionally experts figured about 70% of pre-retirement expenses. That estimate will probably get you close but you might want to take a look at your current expenses and calculate work related costs.

One wild card in your calculation is the cost of health care. In 2023, the base premium for those enrolled in Medicare Part D (for prescription drugs) is $32.74 with an annual deductible of up to $392.88 . But that’s not as bad as the $7,908 per month it costs for the average semi-private room in a nursing home. Medicare will cover many, but not all, medical expenses.

Don’t worry about getting an exact number on expenses. For now, just get a reasonable idea of your after retirement expenses.

2. Estimate your retirement income.

Next you’ll need to estimate your income. You can find out how much you’ll get from Social Security by filling out an online form at www.ssa.gov. You can use your Social Security figures in conjunction with with one of the many online tools that can help you determine the best age to retire in order to maximize your Social Security benefits.

To determine the amount you’ll receive for private pension plans, the plan administrator or your employer should be able to tell you what you’ll get.

3. Compare your retirement income and retirement expenses and make a plan for any shortfall.

Now for the moment of truth. Compare the income and expenses. You’ll have three options for any shortfall. You can trim expenses, earn extra income or count on income generated from your savings.

Reducing expenses can be hard for retirees.

Once you get past travel and entertainment, there isn’t much discretionary spending. Housing, food and medical expenses can only be reduced so much. (See How Retirees Can Live on a Tight Budget.)

Earning part of your retirement income is becoming more popular.

As more retirees enjoy good health, they happily consider some work as part of their lifestyle. According to the Next Gen Personal Finance,  more than 25% of people age 65 and older are still in the workforce and these levels are expected to increase to at least 30% by 2031.

Related: Finding Part-Time Work When You’re 50+

4. Create an investment plan.

Patricia, you are correct. According to the numbers in your letter, you don’t have near enough money saved for retirement. If your $30,000 nest egg earns 5%, it will only generate $1,500 per year in income.

When you’re behind in retirement savings, your investment plan is important. Although CD’s are safe, they won’t provide the higher return that you’ll need. You’ll want to find a good stock and a good bond mutual fund. Approximately two thirds of your savings should be in the stock and one third in the bond fund. Either fund could lose money in any given year. But with a 30-year horizon, there’s time to recover any losses.

5. Calculate how much you’ll need in savings.

Once you retire, you’ll take income from your savings account. About 7% per year is a reasonable amount that won’t deplete the principal.

How much do you need in savings? To calculate that, take the desired income (for instance $3,000 per year) and divide it by the rate of return (say 7%). In this case $3,000 divided by .07 equals $42,857.

The Most Important Thing You Can Do When You’re Really Late to the Retirement Planning Game

Get started saving now. You might be overwhelmed by the amount you need. But you can’t let that keep you from getting started. Better to save half of what you need than to have saved nothing at all. Fortunately, if you’re still in your 50s, you still have a few years left to aggressively save money for retirement.

And you might need to get aggressive. A move to a smaller home or selling a second car might be in order.

Patricia and her husband do have some things working for them. They don’t have a lot of debt. Social Security income will provide for most necessities. And there are more job opportunities now than ever for people in their 60’s and 70’s.

When you’re really late to the retirement planning game, will you live out your golden years traveling the world? Probably not. But, if you take appropriate action now, you probably won’t end up among the 10% of retirees who live in poverty.

• Playing Catch-Up With Your Retirement Savings
• How To Not Outlive Your Retirement Savings
• A Realistic Second Career for Retirees
• How To Minimize 4 Risks to Your Retirement Savings
• How We Retired With Almost No Savings

Reviewed August 2023

About the Author

Gary Foreman is the former owner and editor of the After50Finances.com website and newsletter. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.