You Didn’t Save Enough for Retirement and You’re 55+

by Paige Estigarribia
You Didn't Save Enough for Retirement photo

Are you 55+ and know that you didn’t save enough for retirement? Perhaps there’s no need to worry. You still have some options for avoiding poverty when you retire if you act now.

Retirement is getting close.

What if you’re coming up on your retirement, and you haven’t been saving? Are there options for people who are 55+ who didn’t save enough for retirement? Can you avoid living a poverty-stricken retirement?

You can, but you need to act now and the choices you make are important. To explore these questions, we reached out to David N. Waldrop, CFP and owner of the personal finance website The Astute Adviser. Here’s what he had to say:

Q: What is the first thing you’d tell someone if they realize they didn’t save enough for retirement?

Mr. Waldrop: It’s never too late! That doesn’t mean it will be easy. In fact, it will be far from it. There will be some difficult choices to make.

Q: What are some options for someone who didn’t save enough for retirement?

Mr. Waldrop: There is no magic bullet here. It comes down to income and expenses. You’ll need to increase your income without falling prey to the “with just a small investment you could triple your income.” You’ll likely end up deeper in the hole. You’ll need to significantly reduce some of your largest expenses and that requires a willingness to drastically change your lifestyle.

Increasing income: There are ways to make extra money all around us. There are probably more opportunities than ever before to make money on the side. You could be a driver for Uber or Lyft or even start a side business. Just be careful not to fall victim to people promising to make you rich with “just a small investment.”

Reducing expenses: This is where the rubber meets the road. How much are you willing to change your lifestyle? You can downsize your home. If you are fortunate to have equity, you can utilize that equity to fund retirement accounts or increase liquid savings. If you’re a renter, you may need to look at some lower-rent options.

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Q: Do the options change depending on a person’s advancing age?

Mr. Waldrop: Age is a huge factor. The more we age, the fewer the options for increasing income or working a side gig. Our physical abilities decline with age, but of course, this depends entirely on one’s physical condition. I know plenty of 70-year-olds that are in far greater shape than people 25 years younger. In addition, if your financial situation requires a move, either to a new neighborhood or across the country, it can be more of a challenge for someone who is well into retirement.

Q: Are there some options that are easier, or may work better, than others?

Mr. Waldrop: Some of these changes will be more difficult for some than others. For the most part, the difficulty resides with the choices involved. For example, if you have younger kids that are still in school, spending decisions are much more difficult than for empty nesters. The spending decisions have a more direct impact on a greater number of people, all of whom have different priorities. If you don’t have kids or have kids that have flown the nest, your decisions only impact you and your spouse. A no-brainer for one person could be a gut-wrenching decision for another.

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Q: Are there some things that people who haven’t saved enough for retirement forget about when they begin thinking about retirement income options?

Mr. Waldrop: People often forget that living expenses should decline when you retire so it may not require as much income as originally thought. However, the other side of this is that our life expectancy is much longer than it was 30 years ago. We’re living longer, which means we’ll need a larger nest egg than years ago. But don’t let that scare you. It’s not about how much you earn, it’s what you keep. Your spending decisions are far and away the most important consideration when making your money last.

People also forget that if you are age 50 or older, you are eligible to make catch-up contributions to your retirement accounts. These catch-up amounts for 2023 are as follows:

  • IRA and Roth IRA: extra $1,000 per year for a total of $7,500
  • SIMPLE IRA: extra $3,500 per year for a total of $19,000
  • 401(k) and 403(b): extra $7,500 per year for a total of $30,000

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Reviewed December 2022

About the Expert

David N. Waldrop, CFP® is the owner of Bridgeview Capital Advisors, Inc., an independent investment advisory and financial planning firm located in El Dorado Hills, CA. David has over 15 years of experience in the financial services industry and regularly writes about all things personal finance at The Astute Advisor.

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