Older and Don’t Have a Retirement Plan - DO THIS!

What do you do when you’re nearing retirement, but don't have a retirement plan in place? This is a question we get all the time. It’s a scary prospect, and a lot of older people are in this situation.

So today, I'm going to cover everything that you need to do to prepare for your retirement when you’re in your 40s, 50s, or 60s (or even older!) and haven’t saved anything (or barely anything!) for retirement. Following these tips will help you feel more secure as you approach those golden years.

1. How Much Do You Need To Retire?

This is the first question you need to answer. It’s the starting point because you need this number to figure out how much you need in investments before you can retire. Just remember: you don’t need an exact number, you just need the closest estimate. You can always modify this number later on. Just begin with your closest estimate.

Here’s how you figure it out: First, pull up your budget and look at your expenses. Then, determine how those expenses will change in retirement. Once you do that, create a “retirement budget.” Do this by working with your existing budget or download our free budget to work with. The idea is to estimate your annual expenses in retirement. Once you get that number (your annual expenses in retirement), calculate it by twenty-five. This is the amount of money you’ll need to reach financial independence and to retire.

2. Start Contributing To Your Retirement Accounts

It’s time to start contributing to retirement accounts. Look into all of your options: a 401(k), Traditional IRA, Roth IRA, HSA . . . the list goes on. Figure out the tax-advantaged retirement accounts available to you and start pouring money into them.

And remember: When you’re dealing with retirement accounts when you’re older, age is actually an advantage for you. If you’re over 50, you can contribute more to certain retirement accounts - and this is great because these accounts aren’t taxed, meaning you reduce your taxable income significantly.

3. Consider Target-Date Funds

If you’re concerned about investing and have held off from investing in the stock market because of your fear of losing all your money, consider target-date funds. But, full disclosure: target-date funds come at a cost. They typically involve more costs than the old do-it-yourself method. In fact, Amon and I don’t own any target-date funds because of this.

BUT, investing in target-date funds is better than not investing at all. These funds are typically designed to reduce the volatility in the market and they use specific dates to figure out if you should be investing more in bonds or equities.

Target-date funds are typically simple and easy to invest in because they allocate investments based on your age and expected time of retirement. They also do frequent rebalancing for you, so you don’t have to worry if you’re not comfortable with rebalancing on your own in a general index fund. Again, if you’re choosing between not investing or investing in a target date fund, you should seriously consider target-date funds. Even better, if you feel comfortable investing on your own, you can create your own stock and bond index fund portfolio to reduce fees. Either way, the goal is to begin investing according to your risk tolerance.

4. What Retirement Income Are You Entitled To?