Is It Ever Too Late to Start Saving for Retirement at Age 60?

Many people believe that starting to save for retirement at age 60 is too late. However, this is not necessarily the case. While it is true that the earlier you start saving, the more time your money has to grow, it is never too late to start. In fact, even if you are starting from scratch, there are still things you can do to increase your chances of having a comfortable retirement.

Tips for Starting to Save for Retirement at Age 60

Here are a few tips for starting to save for retirement at age 60:

• Take advantage of all benefits through your employer. Your employer likely has benefits to encourage you to save for retirement. Many employers offer to match contributions employees make to their 401(k) plans. A simple step to increase your savings is to make sure you are contributing enough to get the full match. Not contributing enough to get the full match is leaving free money behind! Some employers also offer programs to help employees receive matching funds without hitting the contribution threshold. For example, starting in 2024, a provision in the SECURE 2.0 Act will allow for employers to match contributions to retirement savings for the amount employees pay back in student loans.
• Increase savings by 1%. The best way to have more in savings is to, well, save more. A good strategy is to increase your contributions to retirement savings accounts by 1 percentage point every year. Over time, this increase to your savings will add up, but it won’t feel like a major bite out of your budget.
• Convert savings into a Roth IRA. If you’re worried about having enough saved for retirement, you’ll want to find ways to mitigate risks like taxes. One way to control taxes is to convert savings into a Roth IRA. A large portion of retirement savings is done in tax-deferred accounts like a 401(k) or IRA. But taxes are inevitable. Taxes will be due when you start withdrawing from those accounts to fund your retirement. Converting those funds into a Roth account and paying taxes now can help lower your taxes and increase your retirement nest egg. Considering a Roth IRA Conversion? Six Reasons It Makes Sense Please remember that converting an employer plan account to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences, including (but not limited to) a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax adviser before making any decisions regarding your IRA. This conversion can be done in various ways. Some choose to convert to an entire IRA all at once or spread it out over years. It may also make sense to perform conversions over multiple tax years to avoid entering a higher tax bracket. Also, if your employer offers a Roth 401(k) or other Roth options, take advantage of that for possible tax-free withdrawals later on. SECURE 2.0 now allows employers to match Roth contributions in Roth plans as well.
• Consider where you will retire. Your take-home retirement income will vary based on where you live. If you worry about stretching your savings, living in a low-tax state could help. Eight states in the United States have no income taxes — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming. These states don’t tax wages, salaries, dividends, interest or any sort of income, including Social Security benefits. (New Hampshire also doesn’t tax wages and salaries and will stop taxing interest and dividends in 2027.)
• Make catch-up contributions. If you are 50 or older, the IRS allows you to contribute additional money to 401(k) and IRAs above the standard limit. This can help increase your savings in tax-advantaged accounts. Total 401(k) contributions are capped at $66,000 in 2023 (this includes contributions made by an employee and the employer). Another $7,500 in contributions are allowed for people over 50. That brings total 401(k) contributions with catch-ups to $73,500 in 2023. For IRAs, people over 50 can make $1,000 in IRA catch-up contributions every year for a total contribution of $7,500 in 2023. Starting in 2024, there will be an increase in the limit on catch-up contributions for people age 60 to 63 that will be the greater of $5,000 or 150% of the regular catch-up amount in 2025. Many people are often in their highest-earning years toward the end of their careers and may have more money to set aside for retirement. Making catch-up contributions can help make up for lower savings rates in your younger years.

Additional Tips for Saving for Retirement at Age 60

• Downsize your home. If you own a large home, consider downsizing to a smaller one. This will free up some money that you can use to invest in your retirement.
• Sell your car. If you have a car that you don’t use very often, consider selling it and using the money to invest in your retirement.
• Get a part-time job. If you are retired or semi-retired, consider getting a part-time job to supplement your income.
• Invest in dividend-paying stocks. Dividend-paying stocks can provide you with a steady stream of income in retirement.
• Be patient. It takes time to build a retirement nest egg. Don’t get discouraged if you don’t see results immediately. Just keep saving and investing, and you will eventually reach your goals.

It is never too late to start saving for retirement. Even if you are starting from scratch at age 60, there are still things you can do to increase your chances of having a comfortable retirement. By following the tips above, you can start saving for retirement today and make sure you have enough money to live comfortably in your golden years.