Late Retirement Planning Tips

There is so much talk about people starting their retirement planning at an early age. Unfortunately, there are millions of people who think it’s too late for them to start, and so they are hoping for a miracle (read: government intervention) to provide for them in retirement. They refuse to spend time looking for the best retirement plan, or finding alternatives in which to invest!

For most people in this position, it is not too late to start saving for retirement. It just means that you will need to divert more of your money, time, and energy  to get there!

Late Retirement Planning Tips

Fully Fund Your 401k

If you are working for a company that offers a 401k, then you are in a great position to catch up on your retirement savings.401k contribution limits are at $16,500 for 2011, so that means you have a great opportunity to add to your savings each year.

If you are married and your spouse also has an employer that offers a 401k plan, then you can combine to contribute $33,000 this year!

If started at age 45 with $0 saved for retirement but decided to contribute $16,500 each year for the next 20 years, you’d have over $800,000 saved up by the time you reach age 65!

If your spouse does the same, that will give you about $1.65M to spend in retirement.

Don’t forget that most employers will offer what’s known as a 401k employer match. What this means is that these companies will match the amount that you put into your plan up to a certain percentage of your salary. So, in addition to your own contributions, your employer will also deposit money into your retirement account as well. Currently, the most that an employer can contribute is 6% of the employee’s salary.

That’s quite a strong way to make up for lost time!

Open A Roth IRA

Unlike a 401k, which must be administered by your employer, an Individual Retirement Arrangement (IRA) can be set up on an individual level. A Roth IRA is a special type of retirement vehicle that allows your money to grow tax-free. In fact, since your contributions are made with after-tax money, you never have to worry about paying taxes when you “properly” withdraw your money!

The current IRA contribution limits are at $5,000 for both traditional and Roth. If you do that for the same period of time (from age 45 to 65) and rate of return (8% per year), then you will have an additional $250k for your retirement.

That’s another $500k if your spouse does the same!

Take Advantage Of Catch-Up Contributions

If you will be at least 50 years of age by the end of the year, you are allowed to make catch-up contributions in both your 401k plan and IRA.

Currently, the 401k catch-up contribution limit is $5,500. That brings the total that a worker who will be 50 by the end of the year to $22,000!

For your IRA, the catch-up contribution limit is $1,000. That brings the total that you can save annually in your IRA to $6,000.

So, your catch-up contributions have now elevated your total yearly savings to $28,000. Following the same scenario that we used above, you will have almost $1.4M in your retirement account after 20 years (assuming you went from 50 to 70)!

Pay Off Debt

One of the best things that you can do for yourself, both now and in retirement, is to pay off debt! Yes, that includes your mortgage.

There are two main benefits to paying off your debt while looking forward to retirement.

First, the sooner you pay off your debt, the faster you can get to a place where every extra penny is going toward your retirement plan!

Many people fail to save because they are so weighed down with debt – and the consumerist attitude – and they become stuck in a rut. Getting rid of all debt will help to eliminate a major barrier to saving.

Also, the best way to combat a smaller retirement fund (besides becoming a part of the contingent workforce) is to lower your living expenses. If you still have a mortgage and other debt, it will take a lot more money to support your lifestyle.

However, if you enter into retirement debt-free, then you will only have to worry about funding your current living expenses; and not still paying for purchases you made 10 – 20 years ago!


As you can see, you have plenty of tools when it comes to retirement planning. Some people choose to make more risky choices (such as investing in Brazil), but that isn’t really necessary as long as you make it a financial priority.

You may notice that I didn’t mention depending on the government in any way. Even though it has become harder for a creditor to garnish Social Security benefits, that does not mean that our government is committed to taking the necessary steps to saving Social Security in its current form.

You have to take your retirement into your own hands, and be ready to put your money to work for you!


  1. says

    Savings has always been important to me! I make it a priority by setting up a payroll deduction. It helps to have practically no debt except for a small mortgage. Living a low profile lifestyle keeps the expenses low.

  2. Damon says

    Hey Khaleef,
    This article certainly offers hope to many later baby boomers who find themselves in their 50’s and starting over. The housing market wiped out what many of them were banking on for the bulk of their retirement. Great tip on paying off debt though, that is one of the single most important things you can do because whatever isn’t spent can be saved. Not having a 2,000 dollar a month mortgage when you retire would be the same as an account that pays 2,000 a month in interest since that will no longer be an expense you have to deal with.

    Imagine how much you would save if you could pay off the house several years before retirement. All that money good then go into savings. Save now or pay later.

  3. says

    Great article. You nailed it in the first few sentences. There is such an emphasis now on planning for retirement while you’re young with little advice to those who grew up when there was no emphasis.

  4. melody says

    Yup! thats right saving is the most important…control your self! if you can!? you know how to save!

  5. Travis @DebtChronicles says

    It’s never too late to start saving….anything is better than nothing. Better late than never….

  6. Tracy Geier says

    I still kick myself for not heeding the advice of my manager when I was in college. He hung up a chart comparing the amount of savings we would all have by his age if we started by putting just $100 a month into savings while we were still in college. Now, 20 years later, I wish I had. In college it seemed as if I could not afford $100 a month, but only because I did not have my spending habits in check.
    Now we are almost out of debt and have started contributing to our Roth IRAs, but as your article points out, even starting this late we can still have quite a sum of money saved in time for retirement w/o relying on Social Security. Great advice, thanks for sharing.

  7. Kevin@RothIRA says

    A lot of late comers look at the seven figure retirement portfolios the experts say they should have and say “never”, and then they give up. What’s really important though is that what ever they save will be far better than nothing. It’s now estimated that the average retiree will need about $250,000 just to pay for uncovered medical costs. So you don’t have millions of dollars, but if you have a quarter million, at least you’ll have this one crucial expense covered.

    A Roth IRA at a minimum, would provide a tax free source of retirement income. That has value even if it isn’t a tremendous amount. It would be worth maximizing contributions into that plan alone. But there’s still time to load up on other retirement plans, and even non-retirement plans.

    Very good article!

  8. Tanya Johnson says

    Its good to have a retirement plan. we cannot be young forever so we must put our retirement part of our plans. Its nice to know that after a long years of hard work we can now then enjoy ourselves.

  9. Tom says

    I find it interesting tat this site is called notmadeofmoney and is about frugal living. However, If I made enough money to make the size of contributions you write in this at age 45 I wouldn’t need to be visiting a website of this nature in the first place. Instead of being titled notmadeofmoney this site should be called stupidtightasses, because anyone who makes enough money to pay contributions you speak of here either suddenly came into money or is a complete idiot in the classic diffinition of the word.