12 Best way to save for retirement in your 50

Estimated read time 7 min read

People who work in the gig economy or have a part-time job have historically struggled to save for retirement. Part-time employees, freelancers, and gig workers will be able to save for retirement under the SECURE 2.0 Act, which goes into effect in December 2022. The new regulations make it easier for workers who do not have full-time benefits or a pension plan to save for retirement.

When it comes to retirement planning, the reality is that the sooner you start saving, the better off you may be due to the power of compound interest. Yet, whether you started saving late or have yet to begin, it’s vital to know that you’re not alone and that there are actions you can take to enhance your retirement savings.

Consider the following suggestions for increasing your savings and pursuing the retirement you desire, regardless of your present stage of life.

Easier for Part-Time Employees to Join a 401(k)

Prior to the SECURE 2.0 Act, companies were required to enable employees to participate in their 401(k) plan if they had completed at least one year of employment with 1,000 hours or three consecutive years of service with 500 hours each year.

Employers will have to change their plan criteria as a result of the new law. “Long-term, part-time workers will get some support even sooner,” says Bryan Kuderna, a financial advisor and author based in Shrewsbury, New Jersey. SECURE 2.0 provisions decrease the three-year rule to two years for plan years starting after December 31, 2024.

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How much to save for retirement by age?

save for retirement in your 50
save for retirement in your 50

Start saving as much as you can now, especially if you’re just starting to save for retirement, and let compound interest — the power of your assets to create profits, which are reinvested to build their own earnings — work in your favour. “The sooner you begin, the better off you’ll be,” Greenberg adds.

How to save for retirement after maxing out 401k?

Lower and middle-income Persons who contribute to a retirement account are eligible for the saver’s credit. It applies to individuals with an adjusted gross income of $36,500 or less until 2023, or married couples filing jointly with an income of $73,000 or less. Individuals are eligible for a $1,000 tax credit, while married couples are eligible for a $2,000 credit.

The SECURE 2.0 Act would substitute the saver’s match for the saver’s credit. Those who qualify can anticipate a donation to their retirement account rather than a credit against their tax burden. Participants in 401(k) and IRA plans can receive matching contributions from the federal government.

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 Contribute to your 401(k) account

If your employer offers a traditional 401(k) plan and you’re eligible, it may allow you to contribute pretax money, which could potentially be a significant advantage. Say you’re in the 12% tax bracket and plan on contributing $100 per pay period. Since that money comes out of your paycheck before federal income taxes are assessed, your take-home pay will drop by only $88 (plus the amount of applicable state and local income taxes and Social Security and Medicare taxes).

That means you can invest more of your income without feeling it as much in your monthly budget.Footnote 1 If your employer’s 401(k) plan also offers a Roth 401(k) feature, which uses income after taxes rather than pre-tax funds , you should consider what your income tax bracket will be in retirement to help you decide if this is the right choice for you. Even if you leave that employer, you have options on what to do with your 401(k) account.

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Employees to save for Portable Retirement Accounts

The SECURE 2.0 laws provide instructions for employees to migrate their retirement savings when they leave a job. “This is especially critical for part-time employees who are likely to change jobs,” says Brian Colvert, CEO of Bonfire Financial in Colorado Springs, Colorado.

Prior to the SECURE 2.0 Act, hourly employees had a tough time accessing a retirement account. “These rules assist part-time workers in beginning to save for retirement early and ensuring that their investments grow and are safeguarded over time,” Colvert adds.

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Good amount to save for retirement employer’s match

“If your company matches your 401(k) plan contributions, make sure you contribute enough to take full benefit of the match,” Greenberg advises. Your company, for example, may offer to match 50% of employee contributions up to 5% of your income.

That is, if you make $50,000 per year and pay $2,500 to your retirement plan, your employer will contribute an additional $1,250. It’s basically free money. It should not be left on the table.

Automatic enrollment in retirement plans

Prior to the SECURE 2.0 Act, companies with retirement plans may choose to enrol their employees in automatic enrolment. Most big corporations will be required to have automatic enrollment in place under the new standards. This will apply to new 401(k) and 403(b) plans created after December 31, 2024.

Deferred pay must be at least 3% of starting salary and no more than 10% of total compensation. Deferrals will grow by at least 1% of salary for each plan year that follows. This will continue until the contribution amount reaches at least 10% of the pay, with a maximum of 15%.

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Take advantage of catch-up contributions if you’re 50

One of the reasons it is critical to begin saving early is because yearly contributions to IRAs and 401(k) plans are restricted. What’s the good news? When you turn 50 in a calendar year, you can make catch-up contributions to IRAs and 401(k)s that exceed the regular restrictions. 3rd footnote Thus, if you haven’t been able to save as much as you’d want over the years, catch-up contributions can assist enhance your retirement funds.

Fastest Ways to Prioritize save for retirement

The SECURE 2.0 Act’s features make it easier for part-time and gig workers to save money for the future.

“Don’t accept the myth that you don’t have enough money to save for retirement right now,” advises Alexander Joyce, president and CEO of ReJoyce Financial in Carmel, Indiana. “Make it a goal to pay yourself first from every paycheck you receive, rather than following the typical budgeting technique of saving whatever is left after all debts are paid.”

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 Rein in spending save for retirement

Examine your financial situation. You may negotiate a cheaper vehicle insurance rate or save money by taking your lunch to work rather than purchasing it. Merrill provides a cash flow calculator that may help you figure out where your money is going and where you can cut back so you have more money to save or invest.

Easier for Part-Time Workers to Join a 401(k)

Prior to the SECURE 2.0 Act, companies were required to enable employees to participate in their 401(k) plan if they had completed at least one year of employment with 1,000 hours or three consecutive years of service with 500 hours each year.

Employers will have to change their plan criteria as a result of the new law. “Long-term, part-time workers will get some support even sooner,” says Bryan Kuderna, a financial advisor and author based in Shrewsbury, New Jersey. SECURE 2.0 provisions decrease the three-year rule to two years for plan years starting after December 31, 2024.

Frequently asked questions (FAQ) about save for retirement

How much to save for retirement by age?

The amount of money that you should save for retirement varies based on your individual circumstances, such as your current age, your retirement goals, and your lifestyle expectations.

How to save for retirement without 401k

Roth IRAs are a type of IRA that allow you to make after-tax contributions. The money in a Roth IRA grows tax-free, and you can make tax-free withdrawals in retirement.

How to save for retirement at 50

Increase your retirement contributions: If you have a retirement account, such as a 401(k) or IRA, consider increasing your contributions.

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