When it comes to saving and investing, those who start early have a formidable advantage. Early savers have compound interest working for them and a comparatively longer time horizon that can compensate for financial mistakes and losses as well as market gyrations. However, for those in their forties and over who must grapple with the daunting realization of not having adequately prepared for retirement, "catching-up" takes on a whole new dimension and meaning in terms of financial planning. Late savers, if they want to achieve their financial objectives must continually strive to overcome the recurring feelings of discouragement and regret that arise from missed opportunities. Yet, it is still possible, with careful planning and discipline, for even late savers to patch together a healthy retirement portfolio.

Understanding Your Financial Dynamics

Those who are building a retirement portfolio almost from scratch at a later age will have to consider and evaluate a few critical factors: the dynamics of income versus saving as they pertain to their specific personal situation and financial obligations, ability to generate present and future income, the condition of their overall physical health and a rethinking of retirement.

Before one can embark on implementing a financial plan, one should carefully assess the interplay between income versus saving and evaluate against other criteria such as cost of living, debt level, spending and saving habits and taxes along with other relevant variables. Examine each variable such as your income. Is it too low compared to the amount required to adequately meet your living expenses? Are you then left with practically nothing in the way of personal savings? Or, are you what would be defined as a "high income" earner but simply unable to save? A high income does not correlate to personal wealth. There are many high income earners who have surprisingly little in the way of actual financial assets. Understanding our personal financial dynamics is the first step towards building a "workable" plan.

Developing A Plan Of Action

1. Avoid looking back as it can only serve to discourage you from propelling forward and make substantive progress.

2. Create a disciplined savings strategy and stick to it.

3. Create a targeted financial plan for retirement. Work with "real" numbers. Having a numerical target helps you define your goals and implement a strategy. Begin with small goals first and then gradually transition to larger objectives. Every financial plan will involve revision. Financial strategies should be adjusted accordingly in terms of personal needs, market conditions and the overall economic and social climate. In some cases, downsizing, relocation or working an additional part-time job may be a practical choice. One should consult with a professional and knowledgeable retirement specialist or financial planner in order to map out an individual strategy. Late savers have to be "smart" and focused with regard to their investment decisions as they have less time to financially bounce back from losses and market downturns.

Tips And Strategies For Late Savers

1. Never invest or make any financial decision in a panic mode.

2. Calculate retirement income from all sources including Social Security, employer pensions, etc. What are the gaps?

3. Avoid underestimating your expenses and overestimating your financial assets as they pertain to your life in retirement. Even if you surmise that you will need 80% (a fairly conservative estimate, assuming a pre-retirement annual income of at least $40,000) of your current income in retirement, consider at the very least, of adding another 12% to 15% for unforeseen emergencies.

4. Avoid the temptation to chase investment yield over everything else. Late savers are under tremendous pressure to make up for lost time, however, every investment is not appropriate for everyone.

5. Maximize contributions to tax-deferred retirement plans such as the 403(b), 401(k), IRA, Simple IRA, Solo 401(k) or Spousal IRA (check eligibility requirements and rules). Individuals aged 50 and over are eligible to make "catch-up" contributions.

6. Start building income-oriented investments in anticipation for life in retirement. Being able to generate even $5000 to $8,000 a year, or more, in interest or investment income alone while still working in your fifties and sixties is a laudable achievement.

7. Aim for an appropriate investment asset allocation mix tailored to your personal situation.

8. Do not neglect building your emergency funds. Try to accumulate a sizable portion in "safe" liquid savings.

9. Avoid or try to minimize debt. We often associate a high debt load with younger individuals. However, a growing number of individuals in their forties, fifties and beyond are incurring excessive debt, due in some part to stressful personal difficulties such as a job loss or illness.

10. Rethink retirement. You may need and even prefer to work part-time during retirement. More and more retirees are pursuing new careers or becoming entrepreneurs. Start planning for your life in retirement now.

11. Understand the tax implications of your investments, particularly as they pertain to your life in retirement. How can tax-advantaged investments help you in reaching your goals?

12. Practice preventive care which means being proactive and vigilant about your physical well-being.


For informational purposes and not intended as advice and/or recommendation.