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The Future is Now: How Late Is Too Late to Start Saving for Retirement?

Elizabeth MacBride
Elizabeth MacBride

By now, you've probably read all of the articles that tell you the best time to start saving for retirement is, well, yesterday.

The earlier you start, the more time your investments have to grow. 

Compound interest, it's said, is the eighth wonder of the world. Over time, you earn more from the interest on your investments than from the investment itself.

If you put $10,000 away when you are 22 years old, it will grow to be almost $100,000 by the time you are 70 years old, even if you never put another cent in, assuming a conservative 5 percent rate of return.

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If you put $10,000 away when you are 55 years old, it will grow to be almost $20,000 by the time you are 70 years old. 

Understanding the importance of time, some people are even starting to save for their kids' or grandkids' retirement.

But suppose, like most people, retirement for yourself, much less your kids, was low on the priority list in your 20s or your 30s.

You had a career to start, perhaps kids to rear, or a business to get off the ground. Then the years turned into decades, and now, you find yourself in your 50s with next-to-nothing in your retirement account. 

The first thing to know is that you're not alone. The median balance of the IRAs belonging to people in their early 50s is about $32,000; it's $41,000 for people in their late 50s, according to the Washington, D.C.-based Employee Benefits Research Institute.

The average balance, skewed by high-income earners whose account balances are higher, is $92,000 between ages 50 and 54 years old, and $123,000 among people ages 55 years old to 59 years old. 

If you take 401(k) balances into account, the typical household made up of Americans in the 55 years old  to 64 years of age range has accumulated only enough retirement assets, $120,000, to produce $400 to $500 of income a month to add to Social Security payments, according to the Federal Reserve's Survey of Consumer Finances.

You probably know how much you're going to receive in Social Security (you can find out by going to this link on the Social Security Administration's website.)

It's not too late, but it all adds up to the necessity of taking action now. Telling yourself it's too late to start saving is like Chicken Little burying his head in the sand. Here are four steps you can take to turn your retirement plan around, even if you've saved next-to-nothing so far.

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Reduce Your Consumption

Though much of the conversation around retirement focuses on increasing savings, the more powerful step is to reduce consumption. If you're in your 50s, can you cut your spending by 20 percent a month?

If you do, it will pay off two-fold: You'll have more money to save, and you will have reduced the amount you need every month. Cutting back some now means you might not have to cut back drastically later.

Plan to Work Longer

Extending your working life to 70 years old has several great benefits. First of all, whatever you've saved gets more of a chance to grow. If you're 55 and have an account balance of $32,000, you could put in $3,000 a month.

By the age of 65 years old, you'd have about $528,000, assuming that five percent rate of return. If you delay retirement by five more years, you'd have $805,000. Five more years makes a big difference.

And there's another benefit, too: If you put off taking Social Security from age 62 to age 70 years old, you increase your monthly benefit by 76 percent. 

Tap Your House as an Asset Sooner Rather Than later

If you sell your house and downsize, you'll be able to use the proceeds to add to your retirement savings, tax rules permitting.

If you live in an area where the real estate is appreciating fast, in other words, if your home is increasing in value each year by more than you can expect to earn in the market, you might not want to take this step. But it's a move to consider.

If you believe you'll have to downsize eventually, the sooner you can practically make the move, the better off you will be. 

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And, of Course, Double Down or Triple Down on Your Savings Now

If you're 50 year old or older, you can make catch-up contributions up to $6,000 to 401(k)s and an additional $1,000 to IRAs. That's on top of the regular limits of $18,000 for 401(k)s and $5,500 for all your IRAs combined, including traditional or Roth IRAs.

Absolutely, you should start saving in your 20s, or even younger, if that's where you are. But wherever you are, right now, just start.

When it comes to retirement savings, like most other things in life, now is always the best time.

Image Credit: Utah778 / Getty Images
Elizabeth MacBride
Elizabeth MacBride Member
Elizabeth MacBride is a writer and editor for and She is an expert in translating complex financial topics, including the latest research, into actionable advice that is easy to understand. Her work has appeared on CNBC, Forbes, BBC Capital, Investment News, and many others.