The earning you make in your early 50s are important. Did you know that the average man in his mid-50s earns up to 127% of what he started with in his career? But where do these people stand on the growth chart? These men, despite their earnings, do not experience that sharp upward curve that they had in their late twenties. The jolts in the curve arrive when they are in their mid-thirties and early forties. From then on, they experience very small bumps and increments. The graph only climbs alongside inflation.
Before retirement, the average male may have reached his peak in earnings in his mid-fifties while CEOs experience their last enormous bump at this age alongside a similar age of lower hierarchy also slowing down. This factual trajectory can have a significant impact on savings for retirement.
People still getting salary raises and approaching their 50s think they have plenty of time for savings until their children move out of the house. When they reach their 50s, however, they may start dealing with the stress of declining earnings.
Retirement savers are allowed a maximum annual contribution of $6,000 into their 401(k) along with an additional $1,000 for retirement accounts. Savers who start earlier, however, have an allowance cap of $18,000 for 401(k) and $5,000 for retirement accounts.This difference illustrates how important it is to start a retirement savings plan early on.
Limiting Your Lifestyle
Unless you’ve financially planned for a lifestyle in retirement comparable to your working years, you’d be wise to keep your budget in check during your peak earning years. A good rule of thumb while you’re working and receiving salary increases is to squirrel away at least 50% for retirement.
If You’ve Lost Some Time
If this is the case, you needn’t only resign yourself to Social Security. This tends to be quite risky because if you are retiring in 10 years or so, approximately 90% of your social security will be utilized for health expenses. In order to catch up on savings, you will now have to save a larger percentage of your principal earnings, although you may be reluctant to accept such changes in lifestyle. Increasing your level of savings—say from 10% to 30%—may be difficult at first, so it’s advisable to make this change in 5% increments as you adjust learning to live on a tighter budget. This course of action can be a challenge but very achievable. Get creative—cleaning the house yourself for exercise, shopping around for a more affordable gym membership and opting for coffee at home instead of that pricier store-bought option.
Take that old cliché “another day, another dollar” to mean another dollar to invest in your retirement savings!