Tips for Late-Start Retirement Planning

late-start retirement planning

By K. Bridget Schneider, CFP®, CRPC®
late-start retirement planning

Last month we suggested a few reasons early retirement planning is important.  That’s valuable information for Millennials, but what if you’re a Gen Xer?  You don’t need to feel like you’ve missed the boat.  For those of you closer to retirement age, let’s focus on some tips for late-start retirement planning.

Prioritize Saving for Retirement

You are most likely approaching the middle of your work career and your peak-earning years.  If your retirement savings are falling short, I urge you to focus on your needs instead of the needs of others.  Don’t scrimp on saving for retirement to help your kids pay for college or set up their household as they leave the nest.   Your kids have more options than you do at this point, such as using student loans.  The best gift you can give your kids is your own financial retirement security.  So, make a commitment to maximize saving for retirement.  If you have an employer-sponsored retirement plan, increase your salary deferrals into it.  For example, you can contribute up to $19,500 to a 401(k) plan for 2021.  There are also ways to save for retirement outside of a workplace plan, which can help with late-start retirement planning.

Play Catch-Up

Those of you 50 or over are eligible to make catch-up contributions to employer plans or IRAs.  So, if you participate in your employer’s 401(k), 403(b), or 457 plan, you are allowed to contribute an additional $6,500 in 2021.  Those who contribute to an IRA and are age 50 or more can add $1000 to the maximum IRA contribution of $6,000 in 2021.

Don’t Increase Your Risk

It may be tempting to invest aggressively and take more risk to make up for the lost time.  While the potential returns might be higher, the risk of loss is also higher.  Your investment risk should be in line with your time horizon for using that money.  Investors in their twenties or thirties can handle losses since they have more time before they will use it to recover, but those in their fifties cannot.  Instead, allocate your investments in a way that historically has offered the potential for growth but also a potential downside you can live with.

Pay Off Debt

Besides maintaining a focus on saving for retirement, you should also evaluate your debts.  It is a good idea to work on paying off any with high interest rates.  One exception to this might be paying off your mortgage.  While it would be nice to eliminate that mortgage payment before retirement, you’ll probably need to use the excess cash flow you have now to save for retirement.  Finally, I encourage you to think twice before taking on any new debt at this time. 

Maximize Social Security

The final tip for late-start retirement planning is to maximize Social Security.  Your benefit will be based on your 35 highest years of earnings, so it may increase if you continue working during your peak earning years.  Besides, working longer will also allow you more time to save for retirement.  Social Security benefit amounts will vary depending on when you start collecting them.  Some decide to start collecting Social Security as soon as they’re eligible as a way to get additional income to pay off debt or save.  This may be short-sighted.

While you are allowed to start taking benefits as early as 62, don’t be tempted to do so while you are still working.  First, your benefit is permanently reduced from the amount you would receive at full retirement age.  And second, for those who are younger than full retirement age for the entire year and still working, Social Security deducts $1 for every $2 you earn above an annual limit.


It’s true that the earlier you start planning and saving for retirement, the more time those savings will have to compound.  But even if you only have ten to twenty years remaining, these tips can help you toward your goal of late-start retirement planning.    

You may find it helpful to speak with a Certified Financial Planner™ professional.  Be sure to visit our website today or call us at 217-605-8130.  At Connections Financial Advisors, our mission is to help you make more informed decisions to better your financial position and reduce your financial stress. 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized tax or legal advice. 

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