With retirement on the horizon, saving in your 50s can be more stress-inducing than in previous years of your life.
In fact, when compared with those in their 20s, 30s and 40s, Americans in their 50s put away the least amount of money last year, saving an average of $4,780, according to data from New York Life. People in their 30s saved the most, with an average of over $9,800 saved.
Americans in their 50s also fell short of their goal of saving around $5,630. This could be due to several financial drains on this age group, such as supporting children or helping elderly parents make ends meet, says Wes Shannon, a certified financial planner at Brazos Wealth Advisors.
Some people in their 50s also “still have never learned to live within their means,” he says. “They just live a little too flashy or too much above what their real income is.”
You can still take steps to save more even if you’re struggling with these burdens. Read on for three strategies Shannon recommends to put aside more this year.
1. Watch the pennies and the dollars
Cutting small expenses can help you save more in the long run, Shannon says.
He recommends looking for little savings opportunities wherever you can, like cutting cable or curbing the amount of times you use Uber Eats and cooking at home more.
“It’s the little things like that that eventually add up,” he says. “After a while, a person who has not been saving, when they start saving it kind of compounds itself… and it feels good, they want to save more.”
2. Consider downsizing
If your children have moved out, it doesn’t always make sense to pay for a big house that sits mostly empty, Shannon says.
Instead of paying to heat and cool a 4,000-square-foot house, keep up with landscaping or maintain a pool, consider moving to a more cost-effective home to save more of what you would be spending on upkeep of a large home.
“Downsizing makes sense,” Shannon says, and moving to a condo or a townhome “can help reduce overall expenses.”
3. Increase your 401(k) contributions
Retirement may be a decade or so away, but putting more cash into your retirement accounts now will help you down the line.
Shannon encourages his clients in their 50s to increase contributions to their 401(k)s first.
“If they are not already making the maximum contributions, I encourage them to increase it by one half of each pay raise they get,” he says. “So if they get a 3% raise, increase the 401(k) another 1.5%.”
This can become easier as children leave the nest and no longer require as much financial assistance. Shannon also recommends putting the cost of those previous expenses into your savings, as “making small, regular increases adds up significantly.”
