How to Retire at 60: Your Two-Part Action Plan
More than 50% of Americans age 35 to 54 have less than $10,000 saved for retirement, according to Time.
How we got to this point over the last 15 years is hardly surprising.
Many investors watched helplessly as their 401(k)s became “201(k)s” during the Financial Crisis… for the second time in a decade.
Generation X-ers were particularly hard hit, losing roughly 45% of their average net worth during the Great Recession, according to the Financial Times.
First, you are not alone. Millions of Americans are in the same situation.
Second, you have plenty of time to start building or rebuilding a retirement nest egg that’ll put you on your way. No matter your age, there’s runway ahead.
Third, you really can retire by 60. It’ll take work and some diligent effort, but it is absolutely possible.
To catch up, you’ll need to achieve steady, oversized gains to reach your goals. But you can’t incur unnecessary risk.
You can get started with these immediate steps:
- Maximize Your Retirement Benefits
This sounds so blatantly obvious that it’s not worth mentioning but, in reality, that’s exactly why I am bringing this to your attention.
The majority of Americans do not use their IRAs and 401(k) options at work, which means they are leaving a boatload of money on the table that could otherwise be in their pocket.
In 2017, you can put up to $18,000 into a 401(k) account. All of this money does not count toward your adjusted gross income (AGI) when you file your taxes each year. Also, many employers have matching contributions in which they will meet as much money as you put into your account up to a specific percentage.
Simply put, this is free money for your retirement, and it can reduce your taxes.
On the IRA side, you have two options if you work for an employer. You can open a Traditional IRA or a Roth IRA (though the latter has income maximums to qualify.) Conventional wisdom is that you put aside at 10% to 20% of your income or more to an investment savings account, but I say put as much as you can afford to in.
Every dollar you put into retirement now is a dollar that works hard for you for the rest of your life – and which has the potential to maintain the standard of living you want.
If you currently live on $80,000 per year, for example, and want to maintain your standard of living, you will require roughly $2 million in assets by the time that you retire.
To reach this goal, you may want to start putting away 10% to 20% of your paycheck each month depending on where you are in your 40s.
If you have maxed out your 401(k) and IRA, you may also consider investing your money in another account, and consider investing in stocks and bonds that pay high yields.
That’s not always easy to do which is why I urge you to set up an automatic payroll transfer to shunt money directly into your retirement account before it hits your bank account and you spend it.
While you’re at it, make sure to also put away additional raises and bonuses, too. Not only will doing these things help you pay less taxes, but they can help you rapidly build money for a time in your life when you’re going to need it.
Don’t forget about savings, either.
It’s very easy to boost your savings over time if you are disciplined about it. Suppose you earn $50,000 and put away 10% in the first year, for example.
Each year you gradually boost your savings on that $50,000 by 1% through the decade.
By the end of ten years, you would have saved $72,500 of the $500,000 you would have earned over the decade. Assuming a 6% return, that account would be worth $92,955.
After another 16 years, the money you saved in your 40s (at a 6% rate of return) will be worth $248,870. And that is assuming that you have earned no additional money during that time.
[Special Note if You’re Over 50] The U.S. government wants Americans to maximize their retirement savings after the age of 50. An American in their 50s has one advantage that others were paying into retirement plans do not. They can bolster their retirement plans by making “catch-up” contributions each year. Since IRA contributions do not count toward your Adjusted Gross Income, it is critical that you embrace this added benefit.
If you’re 50 or over, you’re allowed to add an additional $6,000 a year to your 401(k), and an additional $1,000 into an IRA. In total, that’s $24,000 for your 401(k) and $6,500 for your IRA.
And I’ve uncovered the best way to make $2,000, $5,000, or more each month and add it to your account. It’s a simple way that can both protect you from today’s new government regulations…
And is already helping thousands of ordinary Americans retire as millionaires. To see the full story, click here.
- Cut Thousands of Dollars over the Decade with This Debt Trick
The other side of the coin – pun absolutely intended – is debt.
Wall Street and Washington want you to believe it’s necessary, but I think that’s a lot like asking an alcoholic if he wants another drink with the intention of healing him.
Pay cash if you can… for everything. And, pay off what you can’t as fast as you can.
Start with your highest-interest debts like credit cards, or to find ways to refinance those loans and debts to reduce those interest costs.
The current average rate for a variable rate credit card is higher than 15% a year, according to BankRate.com. Also, many student loans from decades ago could have interest rates higher than 8% depending on when they were accessed.
Retiring your mortgage the moment you can is something I think is a great idea and one that can potentially save you hundreds of thousands of dollars over the life of a conventional 30 year note.
Or, simply pay off the equity faster than the bank calls for. Doing so saves you interest payments while also keeps more cash in your pocket. Simply making bi-weekly payments can shave 4.5 years off a conventional 30 year mortgage with an interest rate of 4.57%.
Obviously, we’ve just scratched the surface today. You’ll want to talk with a tax professional to figure out the finer points of what I’m suggesting as they reflect your personal circumstances.
And, chances are good you’ll want to get your hands on a well-rounded plan that’s far more comprehensive than the few tips I’ve been able to share with you today.
The late Steve Jobs had a saying, “let’s make it simple. Really simple.”
Building your retirement can seem daunting and complicated.
Keep it simple and you’ll live the life of your dreams.
Best regards for a great retirement,
P.S. The ultimate measure of retirement is having enough money to meet your goals and support the lifestyle you’ve always dreamed of. Home runs are nice, but in this day and age, consistency and certainty are more important when it comes to building a nest egg of $1 million – the average dollar figure needed for a decent retirement. These are all topics addressed in the Money Map Report, my premium investment research service. I’m offering it to you today for $5, but this deal won’t last long. Click here to claim your discount.