Editors' pick: Originally published Jan. 6.
It's never too late to start saving for retirement. But that does not mean that late starters will be able to live the lifestyle in retirement that they have grown accustomed to in their working lives.
Baby Boomers, or those in their 50s and early 60s, have a particular set of challenges ahead of them to prepare as well as possible for their golden years, especially if they're behind.
Of course, there's the saying "better late than never," and in this case it's true. But you would be so much better off if you had started earlier.
And just because it's never too late to start saving for retirement, it doesn't mean that if you start late you will be able to live the lifestyle you expected in retirement. The hope is that by the time you're 50, you'd at least have started.
"In your 50s, hopefully you should have good nest egg," says Bob Stammers, director of investor engagement for the CFA Institute. "If you haven't, it's a good time to start super saving."
He says a lot of people in this position have good earnings, but they don't have enough control of their expenses. "They need to put away as much as possible," he says.
Laurie Blackburn, first vice president, Investments at the Speck - Caudron Investment Group of Wells Fargo Advisors in Alexandria, Va., says the first thing someone in their 50s should do is take advantage of the catch-up provisions for IRAs and 401(k)s.
For 401(k), 403(b) and 457(b) participants, the regular contribution is $18,000. People aged 50 and older can contribute another $6,000 with the catch-up provisions for those plans. IRA participants can contribute an additional $1,000 this year to the standard $5,500.
"If they didn't start saving young enough, they absolutely have to do this," Blackburn says.
Stammers says Boomers should also be maxing out their contributions to all tax-deferred retirement accounts, begin to take advantage of Roth accounts so they can have more flexibility and make sure they have adequate life insurance to protect their family in case of some medical calamity.
Tom Mingone, founder and managing partner of Capital Management Group, says people in their 50's have an opportunity to refocus.
"Your kids are older and you are in your peak earning years," he says. "Max out any wealth accumulation program you have and start saving hard for home stretch. That's where you probably have the most potential to create wealth with peak earnings and lower expenses."
Blackburn says if you are in your 60s and don't have a financial advisor, you need to start thinking about hiring one. "You need to get illustrations run to see what your retirement income looks like," Blackburn says. "You need to start planning for how you will take it and how you asset allocations will work.
"Any cash you will need in the next couple of years cannot be invested," she says. You need to have adjustments made for the cash you will need soon."
And you need to have growth in your portfolio, even in your 60s, Blackburn says. You must be prepared if you retire at 67 and live till 92, she says.
"If you don't have the resources, some people have to save more," she says. "It used to be people would retire at 62 and most would be gone by 68. Now (because of longevity), it take much more to retire.
"Social Security on average covers only 30 to 40% of your retirement income," she adds.
Finally, she says, you need to plan to take your required minimum distributions when you turn 70.5. If not, you are subject to one of the most onerous penalties out there, she says. "If you don't take distributions at the right time or the right amount, it's a 50% penalty on the amount you were supposed to take," she says. "That's important to take."