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How to Save for Retirement in Your 40s and 50s


The question of how to save for retirement is an important one, so it’s a great sign that you’re asking it now. Are you 20 years from retirement, or 10 years, or less, or more? Knowing when the time is right to wind down your working life is a major decision — but knowing how you’ll support yourself afterward is even more complicated. Short of money falling from the sky, will you be financially ready to retire when the right moment arrives?

One thing’s for sure: You’ll need a strategy — and sooner rather than later, in order to make sure that you don’t outlive your savings or start your retirement off with only a shaky plan in place. Whether you’re years away from retiring or ready to start the next chapter in your life right now, our experts share the smartest ways to build your nest egg and retire happy.

How to Save for Retirement in Your 40s

Dream big and dream little. Are you roughly 20 years from retirement? Now’s the time to ask yourself a question: What does my ideal retirement look like? The answer will help you set goals, promises expert Emily Guy Birken. Then do the reverse: What’s the least I need to be happy? “An elderly friend whose retirement fund took a hit in 2008 told me that she needs less than she imagined,” says Birken. “A huge reader, as long as she has her library books, she’s happy.” The two visions of your retirement give you something to shoot for and something to fall back on — and the reality will likely fall somewhere in between.

Track down your accounts. “Figure out where you are financially,” says Birken. “It’s like getting ready to start a diet: First, you need to get on the scale to know where you’re starting from. Track down all your accounts from 401(k)s to pensions. If you changed jobs, look for retirement accounts you may not have rolled over. Just call the HR department at your old job for help.”

Save 1 percent more. Have a 401(k)? Raise your savings rate by 1%, recommends Birken. You won’t miss it, yet it really adds up. For example, if you make $50,000 per year and put away an extra 1% ($500) each year, you’ll have an additional $24,711 in your account in 20 years.

How to Save for Retirement in Your 50s

Dream up a Plan B. Are you about 10 years from finishing your career? “Keep your eyes open for post-retirement opportunities,” financial advisor Philip DeMuth, Ph.D., says. “It’s great to have a Plan B that’ll let you work part-time in retirement to supplement your income. Maybe there’s a passion you always wanted to pursue — like cake decorating — or a part-time business you could run out of your home? Also, explore places you might want to relocate to after retirement. Visit there and research the services available to seniors. I just visited Claremont, California, for example, and learned that seniors can audit classes for free in the area’s colleges.” Tip: Visit and to find ideas for “second act” careers.

Play “catch up”. “Take advantage of catch-up provisions,” urges Birken. “When you’re over 50, the contribution limit for your 401(k) is raised from $17,500 per year to $23,000 and from $5,500 to $6,500 for IRAs.” That’s a great way to save more money.

Ready to retire?

Get the most out of Social Security. “The most important decision to make now is when to claim Social Security,” says DeMuth. “It’s almost always better to wait until age 70 because the value of your benefits rises 8 percent per year from age 66 to 70. That’s a great deal.” AARP retirement expert Jean Setzfand agrees: “Most people think you get your maximum benefits at full retirement age — 65 to 67, depending on your birth year — but that’s not true: You max out at 70.” How much more will you get for each year you wait? Head to, advises Birken. “Anyone can learn what her benefits will be and what to expect.” Also consider “For $20, it will run through thousands of scenarios and let you know what your best claiming strategy is,” says DeMuth.

Choose the right 401(k) fund.

“If your 401(k) offers a target date retirement fund from a lowcost provider like Vanguard, Fidelity or Schwab, for example, this will almost certainly be the one to pick,” says DeMuth. “Otherwise, look for index funds: S&P 500 Index, Total Stock Market Index or Bond Market Index. Pick a couple of them, so you have a variety of stocks and bonds.”

This story originally appeared in our print magazine.

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