Planning ahead: Practical strategies and expert advice to catch up on retirement savings later in life

For those in their late 50s or beyond who feel unprepared for retirement, there’s good news — it’s never too late to make meaningful progress.

According to Evan Valeri, financial adviser with CUSO Financial Services L.P. at Cornerstone Community Financial Credit Union, effective planning and disciplined actions can significantly improve your financial outlook, even if you’re starting late.

Start with a financial plan

“Retirement planning should be a living, breathing document,” Valeri said. He emphasizes regularly revisiting your financial plan to accommodate life changes. If you don’t have a plan, now is the time to create one. Partnering with a financial adviser can help you set realistic goals, identify opportunities for savings, and adjust as your circumstances evolve.

Maximize employer-sponsored plans

If you’re still working, the first step is to leverage your employer’s retirement plan fully. “Many people aren’t even contributing enough to take advantage of their employer match,” Valeri said. Matching contributions are free money; failing to capitalize on them is a missed opportunity.

For those aged 50 and older, retirement plans offer “catch-up” contributions. In 2024, you can contribute an additional $7,500 annually on top of the $23,000 limit, bringing the total allowable contribution to $30,500. Ensuring your investments are properly allocated within these plans is equally crucial.

Valeri warns against neglecting investment decisions: “I’ve seen people leave their contributions sitting in money market funds for years, missing out on potential growth. It’s vital to match investments to your risk tolerance and goals.”

Diversify with a Roth IRA

The Roth IRA is another powerful tool, particularly for those without access to employer-sponsored plans. “Roth IRAs are like a cheat code,” Valeri said, referring to their tax-free growth potential. Individuals over 50 can contribute up to $8,000 annually, and once you’ve maxed out a Roth IRA, you can direct additional savings back into a 401(k) or explore other investment vehicles.

Alternative options for nontraditional workers

Not everyone has access to corporate retirement plans. For those who are self-employed or working part-time, Valeri suggests exploring SEP IRAs and SIMPLE IRAs, which allow for higher contribution limits than traditional IRAs. Additionally, taxable brokerage accounts can provide a flexible way to grow your savings.

Reassess Social Security timing

Social Security benefits can be a vital part of retirement income, but when to start claiming them is a key decision.

“If you start at 62, your payments are reduced by about 30% compared to waiting until full retirement age,” explained Valeri. Delaying benefits until 70 increases monthly payments to 132% of the full retirement age amount.

Mitigate market risks

Market volatility poses a significant threat to those nearing retirement. Valeri advises diversification.

“It’s important to spread your investments across different asset classes and risk levels. You’ll want some safe, accessible funds for short-term needs and a portion in equities to outpace inflation,” he said.

Creating a tiered portfolio — dividing assets into short-term, medium-term, and long-term categories — can help balance growth potential with risk management, he said.

Downsizing and home equity

For homeowners, downsizing can free up significant equity to boost retirement savings. “If you’re living in a large family home with empty bedrooms, it might make sense to sell, downsize and invest the proceeds,” Valeri said.

Reverse mortgages are another option, though they come with complexities.

“They’ve been frowned upon in the past, but for the right person, they can be a good way to supplement income,” Valeri said.

Success through discipline

One of Valeri’s favorite success stories involves his own mother. “At 50, after a divorce, she started from scratch,” he said. “Through strict budgeting, downsizing and smart investment choices, she was able to retire comfortably before 65, even purchasing a second home.”

Valeri emphasizes discipline as the key: “Knowing where every dollar goes is crucial. You can make significant progress if you stick to the plan.”

While starting late can be daunting, taking actionable steps and working with a professional can pave the way to a secure retirement.

“It’s never too late to make a difference,” Valeri said. “The sooner you start, the better equipped you’ll be to enjoy your retirement on your terms.”

Cornerstone Community Financial Credit Union is a full-service credit union with branches throughout Michigan, including in Auburn Hills, Center Line, Clinton Twp., Royal Oak, Sterling Heights and Troy.