65 is Not Too Late to Save for Retirement, My Mother is Proof

The Squeeze

• Even if you are close to retirement, committing to boost your nest egg will help in the long run. 

• Downsizing lowers your cost of living in many ways so look out for unexpected changes in financial obligations. 

• Simple financial moves, such as maxing out your 401(k) contributions, delaying collecting your Social Security benefits or opening a money market account and contributing monthly can make a big difference.

Experts often say our attitudes towards money are created in childhood. In mine, the priority never seemed to be about saving. Indeed, when applying to colleges, I was crestfallen to find out my parents hadn’t saved for my education.

And so, as my parents aged, I expected the worst when it came to their financial preparation. When the time finally came to have that uncomfortable conversation with my mother about making plans for their daily care in their late 80s, I was in for quite a surprise. My mother showed me bank statements indicating she had saved a cool half a million dollars since age 65.

The lesson for those of us in the Sandwich Generation: It’s never too late to save for retirement, even after age 65.

Here are the five simple financial moves my parents made to build up a nest egg later in life.

Pay off your debt

When it comes to saving money, debt is the greatest enemy. My parents were always careful to pay off their credit card bills monthly. By comparison, it appears today’s older Americans aren’t as inclined to stay out of debt and are carrying debt into and throughout retirement. Families with a head of household aged 75 or older have on average $44,828 of debt, up from $32,294 in 2010. In addition to debt payments increasing your monthly expenses, you cannot add those funds to your retirement savings you’ll need later. Consider such debt a double loss to your bottom line. 

Downsizing has many benefits

Like many older Americans, my parents downsized in their 60s. They sold their single-family home in Suffolk County, NY — a county that ranks number 12 in highest property taxes nationwide — and moved into a retirement community in Ocean County, NJ. They bought their new home with the sale of their New York home. As a bonus, when my mother discovered their tax rate significantly decreased, she used the difference to start a money market account.

Limit access to extra cash

If your checking account has more money than you need to pay your monthly expenses, move the extra funds to a high-yield, short-term CD or money market account. Over time the compound interest will add up. For instance, if you opened a money market account with just $1,000 and deposited an extra $50 each month, assuming a 1 percent interest rate, you would have saved $13,720 in 10 years. 

Delay your Social Security benefit

Be strategic about taking your Social Security benefit. “Every year that you postpone claiming your Social Security benefit, it increases by 8 percent,” says Lauren Locker, owner of Locker Financial Services, LLC, in Verona, N.J. “If you take it too early — at age 62, for example — that can decrease your Social Security benefit by up to 30 percent,” Locker advises, “If you live to age 90, that is a long time to make do with weak benefits.”

Max out 401K contributions

If you’re still working, you can take advantage of a tax-deferred boost by maximizing your 401K contributions each year. If you're under 50, you can contribute up to $19,500 annually to your 401(k). If you are 50 or older, you can add even more money, with a catch-up contribution, which amounts to $6,500 for 2020 and 2021. In other words, if you are over 50, your current maximum annual limit is $26,000 for total 401(k) contributions.

“There are many good reasons that people are not able to save in advance for retirement,” notes Locker. “But it’s never too late to learn and adopt habits that can lead to better financial health in your later years. Even starting at age 60, you can save plenty in those seven years leading up to the oldest retirement age for Social Security.” 

As for my family, I can report a tremendous sense of relief knowing my mom and dad were financially stable on their own to fund the life they want and need without impacting the retirement my husband and I are working towards, not to mention our daughter’s college education.