When Is It Too Late To Have Nothing Saved for Retirement? (2024)

It is never too late to start saving money you will use in retirement. However, the older you get, the more constraints, like wanting to retire, or required minimum distributions (RMDs), will limit your options.

The good news is, many people have much more time than they think. Even starting at age 35 means you can have more than 30 years to save, and you can still greatlybenefit from the compounding effects of investingin tax-sheltered retirement vehicles.

Key Takeaways

  • It's never too late to start saving money for your retirement.
  • Starting at age 35 means you have 30 years to save for retirement, which will have a substantial compounding effect, particularly in tax-sheltered retirement vehicles.
  • There are several important options to consider when investing specifically for retirement.
  • 401(k)s and traditional individual retirement accounts (IRAs) are often the most popular choice.
  • Roth IRAs, tax-advantaged products, and real estate can be other good retirement investment options.

The Leading Tax-Deferred Vehicles

401(k)s and traditional individual retirement accounts (IRAs) are the leading tax-deferred vehicles for investors looking to save specifically for retirement. This is because both options allow the investor to deduct their contributions annually.

Also, these vehicles allow the investor to defer their tax payments to the years they are in retirement, which are usually lower than their higher-earning years.

401(k)s

401(k)s are a top option for full-time employees who have the ability to contribute to one. Employers typically match the employee’s contributions for an added compensation benefit. Self-employed individuals and small businesses can also offer an iteration of the 401(k) with the same benefits. With this type of investing, funds are deducted pre-tax, though self-employed workers may have to make their own special deductions.

Elective deferral investing from the employee maxes out at $22,500 for 2023 ($23,000 for 2024) for 401(k) accounts. Individuals 50 or over can add an additional $7,500 for 2023 (and $7,500 for 2024). The employer and employee combined cannot exceed a contribution of $66,000 for 2023 ($69,000 for 2024), or $73,500 for those 50 or older ($76,500 for 2024). The catch-up contribution can be especially helpful for those nearing retirement who are worried about their retirement funding.

Any early withdrawals from a 401(k) will be charged a 10% penalty. Also, keep in mind that 401(k)s are subject to required minimum distributions (RMDs) beginning at age 73 (for people born between 1951 and 1959) or age 75 (for those born in 1960 or later). Not taking RMDs will lead to a hefty penalty.

This retirement income calculator from Vanguard can help you create a retirement investing schedule based on your needs.

The Traditional IRA

The traditional IRA offers the same advantages as the 401(k). Investors will typically invest with this vehicle on their own, many after they have maxed out their 401k contribution. For individuals, the IRA contribution limit is $6,500 for 2023 ($7,000 for 2024) with a $1,000 catch-up contribution.

The IRS imposes a 10% penalty on any withdrawals taken from a traditional IRA before age 59½. For the traditional IRA, this is a flat rate penalty with no exceptions for contributions.

Alternative Options

Roth IRAs, tax-advantaged products like municipal bonds, annuities, and real estate can be other good retirement investing options to complement the vehicles above or to invest in alone.

Roth IRA

ARoth IRAalso allows you to save and invest money for retirement while any investment earnings, gains, and interest grow tax-free. This is primarily because funds are invested with after-tax dollars. This means there is no tax deduction associated with Roth IRA contributions. This also means funds withdrawn are never taxed.

Besides the tax-free withdrawals, a big advantage for the Roth IRA is its liquidity. With the Roth IRA, qualified contributions can be withdrawn both tax- and penalty-free after five years. For many investors, this is important because, after five years, the Roth IRA can also potentially serve as an emergency fund.

For 2023, you may contribute up to $6,500 to either a traditional or Roth IRA. The $6,500 limit applies to all IRAs, so you may split the $6,500 any way you would like. For those over the age of 50, the catch-up contribution applies at $1,000. For tax year 2024, the contribution limit increases to $7,000, and the catch-up contribution limit stays the same.

For the Roth IRA, you can withdraw your contributions at any time, tax- and penalty-free. The IRS does impose a 10% penalty on early withdrawals, but this is only on any earnings and not contributions.

The traditional IRA has deduction limits for those with an employer-sponsored retirement plan, which start at a modified adjusted gross income of $73,000 for single or head of household for 2023 ($77,000 for 2024) and $116,000 ($123,000 for 2024) for joint return filers.

Tax-Advantaged Products

There are a few tax-advantaged products in the market that offer some of the special benefits built into retirement vehicles. Municipal bonds, for example, can be a good, low-risk investment. Interest income from these bonds is tax-exempt by the federal government and could be tax-exempt if the investment corresponds with the investor’s state of residence.

Annuities

Annuitiescan also be a good means of saving for retirement. Depending on the kind of annuity, investors may receive a specified level of return with scheduled payouts on a regular basis beginning at their desired time of retirement.

As a result of theSECURE Actpassed by the U.S. Congress in 2019, annuities have become more portable, meaning they can be moved from one qualified retirement plan, such as a401(k),to another.

When Is It Too Late To Have Nothing Saved for Retirement? (2024)

FAQs

When Is It Too Late To Have Nothing Saved for Retirement? ›

It is never too late to start saving money you will use in retirement. However, the older you get, the more constraints, like wanting to retire, or required minimum distributions (RMDs), will limit your options. The good news is, many people have much more time than they think.

How late is too late to save for retirement? ›

Is it too late? It's not impossible to start saving for retirement at 40, and in fact, it's probably not as tricky or complicated as you might think. With some hard work and smart planning, you can start investing for retirement at age 40 and end up a millionaire.

What if I don't have enough money to save for retirement? ›

If you retire with no money, you'll have to consider ways to create income to pay your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.

How do people retire with no savings? ›

Many retirees with little to no savings rely solely on Social Security as their main source of income. You can claim Social Security benefits as early as age 62, but your benefit amount will depend on when you start filing for the benefit. You get less than your full benefit if you file before your full retirement age.

When not to save for retirement? ›

A general rule of thumb says it's safe to stop saving and start spending once you are debt-free, and your retirement income from Social Security, pension, retirement accounts, etc. can cover your expenses and inflation.

What to do if you are 60 and have no retirement savings? ›

Consider part-time work in retirement. If you are able, planning to have a nontraditional retirement may be something you want to consider as well. Income from part-time work coupled with your Social Security benefit could be all you need to live comfortably. It will certainly make your savings go further.

Is 60 too old to save for retirement? ›

Even though retirement is right around the corner, it's never too late to save, save, save! Continue to increase your saving — with a goal of contributing at least 15 percent, or more, of your earnings. If you own a home, try to pay off your mortgage before you retire.

What if I haven't saved for retirement at 50? ›

If you didn't make saving for retirement a priority early in life, it's not too late to catch up. At age 50, you can start making extra contributions to your tax-sheltered retirement accounts (called catch-up contributions). Younger workers can only contribute $23,000 to their 401(k)s and $7,000 to their IRAs in 2024.

Do most people have enough saved for retirement? ›

According a 2023 Fidelity report, Americans on average have saved only 78% of the amount they'll need in retirement, and 52% of U.S. households may not be able to pay for essential expenses in retirement.

How much does the average person need to have saved for retirement? ›

10x your annual salary by 67

To fund an “above average” retirement lifestyle—where you spend 55% of your preretirement income—Fidelity recommends having 12 times your income saved at age 67, which is the normal Social Security retirement age.

Can I retire at 62 with no savings? ›

If you're an average earner, Social Security will only replace about 40% of your former income. So if you retire without any savings, you might end up effectively taking a 60% pay cut. At the start of 2023, the average Social Security benefit was $1,827 a month. That's an annual income of a little less than $22,000.

What do retirees do when they run out of money? ›

If you are already running out of money in retirement, consider part-time work, reverse mortgages, or financial assistance from family members or government programs.

What is the average Social Security check? ›

Social Security offers a monthly benefit check to many kinds of recipients. As of December 2023, the average check is $1,767.03, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.

How many retirees have no savings? ›

Nearly 2 in 5 Retirees Have No Retirement Savings

“There are also a plethora of social and economic variables that impact how Americans are able to accumulate wealth during their working years.

How many Americans do not save for retirement? ›

22 percent of Americans haven't contributed to their retirement savings in the past year, according to a recent Bankrate survey.

Is it normal to have no savings? ›

Up to a third (34%) of adults had either no savings (or less than £1,000) in a savings account. Around six in 10 (61%) UK adults save money either every or most months. Almost two-thirds (65%) of people believe they wouldn't be able to last three months without borrowing money.

Is 40 years old too late to start saving for retirement? ›

Yes, it's very possible to retire comfortably even if you start saving at 40. Regular contributions to your retirement accounts will go a long way toward making that dream a reality. Take advantage of catch-up contributions after the age of 50.

Is 24 too late to start saving for retirement? ›

No matter what stage of life you're in, one thing will always remain the same: It's never too late — or too early — to save money. If you're wondering, “How much should I have saved?" now is the time to flip your mindset.

Is 55 too late to start saving for retirement? ›

If you didn't make saving for retirement a priority early in life, it's not too late to catch up. At age 50, you can start making extra contributions to your tax-sheltered retirement accounts (called catch-up contributions).

Is 50 too late to start saving for retirement? ›

Experts say even in your 50s, it's not too late to take steps to get in better financial shape. “While retirement is an exciting vision for a lot of people, the transition can be really stress-inducing,” said Keri Dogan, senior vice president of financial wellness and retirement income solutions at Fidelity.

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