Why It’s Never Too Late To Start Investing In Retirement

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Estimated reading time: 12 minutes

Worried you’re behind the “Magic 8 Ball” when it comes to investing in retirement savings? If your retirement fund is a bit anemic (or nonexistent), there’s no time like the present to get started.

I’ve talked to many people who put off investing in retirement because they feel it’s too far in the future (and they need to address immediate needs). I talk to others who think they’re so behind that there’s no point. No wonder they’re in despair!

Even if you’ve put your head in the sand, remember time marches on. Before you know it, you’ll hit retirement age. It’s important to consider how you’ll prepare. Even if you plan on working into your 70s or 80s, life might throw you a curveball. It’s best to prepare by investing in retirement. And, if you don’t plan on retiring completely, at least ensure a secure financial future.

Are you ready to start investing, control and manage your finances, and prepare for retirement? Join our amazing community! You’ll receive exclusive financial tips from Making Cents Count, as well as unlimited FREE access to our resource library full of money-saving tools, and guides.

How to Get Strategic About Investing in Retirement

No matter what phase of life you’re in (40s, 50s, 60s…) there’s no time like the present to start investing in your retirement accounts. There’s no set age as to when you should start saving for retirement, but ideally, you should begin as soon as you start working. If you haven’t started yet, don’t panic, though. Even if there’s nothing in your retirement accounts now, you can save hundreds of thousands of dollars in a short time if you’re strategic about your long-term retirement savings plan.

Regardless of how much or little you’ve earmarked toward your retirement, there’s one area you shouldn’t brush off—your employer-sponsored qualified retirement plan! Your employer-sponsored qualified retirement plan is often crucial to making investment headway. These retirement plans are built to help you save money and build your nest egg quickly and strategically.

If you’re on the fence about investing in stocks through your employer-sponsored qualified retirement plan, remember these three essential factors:

Your Employer-Sponsored Retirement Plan

First, an employer-sponsored qualified retirement plan offers the massive advantage of compounding interest. Your earnings grow steadily, tax-deferred. As you’re accumulating more wealth, you don’t need to worry about taxes each year. Putting money away in the form of assets in a retirement plan to earn interest for you is a much wiser investment than handing over the money to the bank for Uncle Sam to take his cut today.

Second, remember many employers offer matching contributions. Think of it as FREE money, people! Do NOT pass this up. Always invest an amount at least up to the employer’s investment. For example, if you get a 4% match on what you’re contributing to your company or 401(K), your employer will match up to 4%. If you’re contributing 6%, your employer will still only match the 4%, but why turn down free money?

To learn more about the various retirement plans offered by various companies, firms, banks, and employers, visit our post on Investing: 7 Retirement Plans Explained.

The third factor is that many plans offer investors a vast range of funds to choose from. You may choose to invest in a money market account or a higher-risk account, depending on your strategy and your risk tolerance. There are so many options for investing in retirement, and you’ll find various funds you feel very comfortable with.

Tough-Love Time: You Can’t Afford NOT to Invest

I’m going to give it to you straight: you need to start investing in retirement now.

I know for some people, putting away more money is a struggle. Some are struggling to save, and investing more money on tomorrow’s rainy day may seem like a big stretch. Putting money away now may feel downright impossible. It’s essential to look at investing your money from two different angles.

The first area to explore is: How much do you really need to start investing in retirement right now? You can get too comfortable with the idea of not saving enough, and this will lead to dire straits in the not-so-distant future. You need to get a clear picture in your mind of precisely what amount you need to start regularly investing in retirement. Look at a retirement calculator tool (like this retirement calculator from NerdWallet). This tool will give you a realistic picture of your retirement savings based on factors like your age, income, and planned retirement date.

The second question to ask is: How much can you actually save? Here’s the time you need to be completely, even brutally honest with yourself. Don’t just look at how much you could “comfortably save” (especially if you’re behind on investing in retirement). To afford your senior years, you may need to make budget cuts. You may need to give up some things you love or even pick up a side hustle for additional cash. It’s also important to note if you’ve been letting your finances slide by, get your money organized for a clear snapshot of your budget.

Let’s Get Real About Retirement

Now, it’s important to stay realistic and honest as you explore these two questions. Let’s get real—no one will live in a state of perceived deprivation indefinitely. You may think you’re going to give up all spending and live on a shoestring budget, but remember: Life happens! It’s not sustainable to believe you will give up everything.

Instead, it might be far more feasible for you to find a way to earn extra cash to tuck away toward your retirement. You may realize downsizing to sell your home, living with one car, or forgoing a cruise for a staycation is doable. Or you may look at your lifestyle and realize you need a higher-paying job or a plan to keep it going. The important part is your ability to look ahead realistically. Don’t ignore the problem. Find an achievable plan for investing in retirement, so you’re successful, not discouraged.

Can You Rely on Social Security?

I’ve heard several people say they’re going to hold out for social security and hope there’s enough to cover their retirement years. Unfortunately, this plan isn’t as sound as you may first think. The truth is, social security doesn’t pay out that much.

For many people, social security benefits are barely enough to get by. In late 2022, the Social Security Administration announced that the average benefit for a retired worker would be increasing by $140 per month. Even if you own your house and live frugally, Social Security doesn’t offer much money to live on.

Social Security benefits depend on earnings. The factor determining a person’s retirement benefit is their lifetime earnings. To normalize these earnings at the time of retirement, it’s adjusted by the national average wage index.

Social Security Benefits for 2023

Here are examples of the benefits for workers with maximum-taxable earnings. The table below shows the initial benefit amounts assuming retirement in January of the stated year, with maximum-taxable earnings since the age of 22.

  • $4,555 Retirement at age 70 maximizes the effect of delayed retirement credits.
  • $3,808 Retirement at age 67 is assumed to be at exact age 67 and 0 months. Age 67 is the normal retirement age for people born in 1960 and later. People who retired at age 67 and who were born before 1960 received delayed retirement credits.
  • $3,506 Retirement at age 66 is assumed to be at exact age 66 and 0 months. Age 66 is the normal retirement age for people born in 1943-54. People who retired at age 66 and who were born before 1943 received delayed retirement credits; those born after 1954 will have their benefits reduced for early retirement. Thus, for retirement in 2021 and later, the monthly benefit is reduced for early retirement.
  • $3,279 Retirement at age 65 is assumed to be at exact age 65 and 0 months. For retirement in 2003 and later, the monthly benefit is reduced for early retirement. (For people born before 1938, age 65 is the normal retirement age. Normal retirement age will gradually increase to age 67.)
  • $2,572 Retirement at age 62 is assumed here to be at exact age 62 and 1 month. Such early retirement results in a reduced monthly benefit.

2023 Annual Social Security + Medicare Reports

These Social Security numbers aren’t looking as stable in the future either. Full scheduled benefits are expected to be payable until 2033, one year earlier than reported last year. While this won’t mean the end of the Social Security program, the fund’s reserves will become depleted and continuing program income will be sufficient to pay 77 percent of scheduled benefits. Congress is taking measures to deal with the issue, but it may result in changes like raising the retirement age.

Even if you get the maximum payout from Social Security, you will face a deficit. It’s important not to rely on those social security numbers since they could quickly shift with the economy and demographic factors in the future. Set your plan for investing in retirement and look at Social Security as just that—a security measure to help bring you extra peace of mind.

Figure Out What You Need to Invest in Retirement with the “Rule of 72”

You may or may not have heard of the “Rule of 72,” but this math shortcut will help you quickly calculate growth rates. Let me explain: This is a formula you apply to any growth rate, from finances to population. In the case of retirement investing, the Rule of 72 helps to estimate the number of years required to double invested money at a given annual rate of return. For a helpful calculator, check out Better Explained.

The Rule of 72 formula is: Years to double = 72 / Interest Rate

So for example: At 6% interest, the cost of managing your money takes 72/6 or 12 years to double.

There are two reasons why the Rule of 72 is so helpful:

  1. The Rule of 72 is a fast mental math shortcut. It comes in handy for mental calculations to quickly gauge an approximate value.
  2. The Rule of 72 quickly helps you compute the annual rate of compounded return from an investment, given how many years it will take to double the investment.

Retirement Tactics + Effects

If you’re behind the Magic 8 Ball in your retirement savings (or suspect you MIGHT be behind), the Rule of 72 estimates the doubling of an investment’s value based on a logarithmic formula. In other words, you will see how long it will take to double your investment. This tactic helps you understand (and appreciate) the positive effects of compound interest. You will quickly see WHY it’s so important to start investing in retirement today.

Finally, no one can deny the feeling of giddiness you get when you realize your money has DOUBLED. The Rule of 72 lets you see an estimate of how long it will take for your money to double, depending on your risk tolerance. This estimate rule also helps you determine if you’re not so keen on using a calculator when you’re trying to compare investments quickly.

Learn the Rule of 72 to help you quickly save time. In a nutshell, it’s a useful mental math shortcut and who doesn’t love to save time?

The Retirement Investing Game

If you’re a little late to the game on investing in retirement, don’t worry. No matter what your retirement plans or age for retirement, you can still keep going. These days, retirement doesn’t mean sitting around in the rocking chair. Life keeps going! Many people still enjoy vibrant activities (including work) well into their senior years. Even if you don’t work a traditional job, keep in mind when you retire, you may still find ways of earning money. You still wake up, have things to do, and have a purpose.

If you already consider yourself older, remember age has many advantages. With age comes wisdom, peace, insight, and a greater appreciation for what you have. Even if you need to continue saving for retirement into your retirement years, compound interest will still work to your advantage. Your money will still grow. Just because you’re saving for retirement IN retirement doesn’t mean your money stops working for you.

Financial Security in Retirement

No matter where you are with investing and financial security in retirement, there’s no time like the present to get started! With savvy saving, retirement planning, financial security, and investment strategies, you’ll be ready to live comfortably in your golden years.

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Once you get your budget rolling, check out my post on 6 Simple Steps to Get Financially Organized. This post also includes a helpful checklist available in my Resource Library (free to access).

Admittedly, this particular checklist has a larger-scale focus on managing your overall financial picture, but I genuinely feel that getting your finances organized is essential.

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