I recently read an article by Carrie Schwab-Pomerantz, the daughter of legendary businessman Charles Schwab. The article addressed the question:
“What do I do if I got a late start on retirement savings?”
It reminded me of a meeting I had last week…
While meeting with a 50 yr. old prospective client who had recently closed down his business, we began discussing a plan for retirement. Over the years, he had invested nearly all of his savings back into his business. He had ZERO in retirement savings.
A recent study by the Economic Policy Institute shows that a Third of Americans are in this same situation.
Our prospective client, after the sale of his business, took a new job, as did his spouse who is also 50. His focus now is making up time from his Self-Employed years to start a retirement nest egg. My thoughts…
- Focus on your 401(k) plans at work! Per the rules of a 401(k), participants can:
- Contribute $18,500 if they are under the age of 50
- Contribute an additional $6,000 if he/she is 50 or older – for a total of $24,500
The above doesn’t even include a company match. This allows him and his spouse to contribute $49,000 per year. With their combined income of $160,000, this will be a tight budget, but very doable.
Here are the results:
AFTER 12 YEARS, IF WE ACHIEVE A 6% RATE OF RETURN ON THE PORTFOLIO, WE’LL HAVE ADDED OVER $900,000 TO OUR RETIREMENT ACCOUNTS!
- Focus, secondly, on contributing to an after-tax brokerage account!
- Since most of the nest egg will be in qualified accounts, set up an after-tax brokerage account. This adds to our overall retirement savings, can be used in case emergencies, can help avoid debt, and can provide flexibility down the road.
We often see these situations. It’s NEVER too late. The main takeaway – TAKE ACTION today and develop a plan. A disciplined, long-term plan is the first step!
-Here is the article if you’d like to take a look: