Is It Too Late to Save for Retirement at Age 60? Absolutely Not!

The Hard Truth About Late-Start Retirement Planning

Let’s face it – hitting 60 with little to no retirement savings can feel overwhelming. You might be thinking “I’ve missed the boat” or “What’s the point of even trying now?” I totally get those feelings. As someone who works with pre-retirees, I hear these concerns almost daily.

But here’s the good news: it’s never too late to start saving for retirement. Yes, even at 60!

Even though you won’t have decades to save up that million-dollar nest egg, there are still things you can do to make your retirement years much better financially. Do something RIGHT NOW and make the most of the time you have left.

Why People Find Themselves at 60 With Limited Savings

First, let’s talk about why this happens. You’re not the only one! Many people reach their 60s with little or no savings for retirement for a variety of reasons.

• Career interruptions or late starts
• Prioritizing kids’ education over retirement
• Health issues or unexpected expenses
• Divorce or other major life changes
• Simply not understanding the importance of early saving

Whatever your reason the past is past. Now it’s important to make smart decisions with the time you have left.

Your Retirement Rescue Plan: 7 Essential Steps

1. Pay Off All Debt ASAP!

One of the clearest messages from financial experts is that debt is your enemy when approaching retirement. Consider the story of Margaret (60) and her husband (63) who shared their situation with Ramsey Solutions:

“The only thing we owe is our house,” Margaret said. They had a good base with this, but they still had to pay their mortgage.

Why debt elimination matters: Every dollar that goes toward debt payments is a dollar that can’t be invested for your future. Plus, entering retirement debt-free reduces your monthly expenses dramatically.

Action step: Create a debt snowball plan to eliminate all consumer debt immediately, then consider strategies to eliminate or reduce your mortgage.

2. Keep Working (But Smartly)

Working a few extra years can be one of the most powerful moves for late-start retirement savers. Here’s why:

• It provides additional years to save aggressively
• It reduces the number of years your retirement savings need to last
• It potentially allows you to delay Social Security benefits (more on that later)

Practical idea: Consider transitioning to part-time work in your mid-to-late 60s rather than abrupt retirement. This “bridge strategy” can extend your earning years while giving you a taste of retirement lifestyle.

3. Maximize Catch-Up Contributions

The government actually gives older savers extra room to save! Once you’re over 50, you can make “catch-up contributions” to retirement accounts:

• For 401(k) plans: An additional $7,500 beyond the standard limit (for 2023)
• For IRAs: An extra $1,000 per year

This means if you’re 60, you could potentially contribute $30,500 to a 401(k) and $8,000 to an IRA annually. That’s serious catching-up power!

4. Rethink Your Housing Situation

For many people approaching retirement with limited savings, their home is their largest asset. This presents both challenges and opportunities:

Option 1: Downsize to free up equity
By selling a larger home and purchasing a smaller, less expensive one, you could potentially free up hundreds of thousands of dollars to invest for retirement income.

Option 2: Consider relocating to a lower-cost area
Moving from a high-cost region to a more affordable one can dramatically reduce your cost of living and make your retirement dollars stretch further.

5. Optimize Your Social Security Strategy

While financial advisors often recommend pretending Social Security doesn’t exist when planning retirement, the reality is that for late savers, it will likely play a crucial role in your monthly income.

Key fact: For each year you delay taking Social Security beyond your full retirement age (up to age 70), your benefit increases by approximately 8%. This is a guaranteed return you can’t find elsewhere!

Consider this example from the Ramsey article:

• A 62-year-old retiring today: Maximum monthly benefit of $1,992
• A 70-year-old retiring today: Maximum monthly benefit of $3,425

That’s a massive difference of $1,433 per month or $17,196 annually – just for waiting!

6. Build a Diversified Portfolio (But Be Smart About Risk)

When you’re starting to invest at 60, you need to balance two competing needs:

1. Growth potential to build your nest egg
2. Protection against major market downturns

Adam Lampe from Mint Wealth Management emphasizes portfolio diversification as “one of the most important facets of long-term investment success.” He recommends:

• Having a mix of stocks, bonds and other investments
• Avoiding having more than 3% of your portfolio in any one stock
• Investing across multiple industries
• Being especially conscious of standard deviation (a measure of portfolio risk)

As Lampe notes, “Younger investors may be able to handle higher risk as they have more time to recover from losses. For those approaching retirement, spreading your money across a variety of investments helps to decrease the likelihood of significant loss.”

7. Be Conscious of Inflation

Inflation is a silent retirement killer that many late-start savers overlook. According to a study cited by Kiplinger, 71% of retirement-age investors are concerned about inflation’s impact on their savings.

To protect against inflation:

• Avoid overinvesting in long-term bonds, which are vulnerable to inflation
• Look for investments with “pricing power” (ability to adjust prices quickly)
• Consider short-term bonds as part of your fixed-income allocation

A Real-World Example: Building $250,000+ in 7 Years

Let’s return to Margaret and her husband’s situation. If they maximize their retirement savings options, they could potentially have more than $250,000 set aside by the time the husband turns 70.

Here’s how:

• Husband maximizes 401(k) contributions with catch-up ($30,500/year)
• Both contribute maximum to Roth IRAs ($8,000 each annually)
• They work a few extra years beyond traditional retirement age
• They potentially downsize to eliminate mortgage payments

While $250,000 might not sound like a fortune, combined with Social Security benefits and perhaps part-time work, it could provide a decent retirement lifestyle.

Common Mistakes to Avoid When Starting Late

1. Reaching for Yield Through Excessive Risk

When starting late, there’s a temptation to invest aggressively to “catch up.” This can backfire badly if a market downturn hits right before you need the money.

2. Blindly Purchasing Annuities

Many retirees are drawn to annuities for their guaranteed income promises. However, Lampe cautions that some annuities “may come with high commissions and fees” and returns “may be much lower than that of your stock investments.”

While annuities might make sense for some situations, they shouldn’t be your default strategy without careful consideration.

3. Failing to Budget for Retirement

You can’t save effectively if you don’t know your target. Take time to understand:

• Your current spending habits
• Anticipated retirement expenses
• Potential healthcare costs
• Tax implications in retirement

Use online tools like AARP’s retirement calculator to help with these projections.

Final Thoughts: Your Retirement Is Still Possible

I’ve worked with many clients who started their retirement planning at 60 or even later. While they faced challenges, most were able to create retirement plans that allowed them to live comfortably and with dignity.

The key is taking immediate action rather than wallowing in regret over past decisions. As Ramsey Solutions points out: “It’s no longer important to explain why you’ve delayed saving for retirement; it’s just important that you get started now.”

Remember these core principles:

• Cut back on spending and get into “gazelle-intense” saving mode
• Work with a financial professional to create a realistic plan
• Stay flexible about your retirement timeline and lifestyle
• Consider working part-time during early retirement years

The retirement you can build starting at 60 might look different from what you once imagined, but it can still be fulfilling, secure, and worry-free if you take action today.

Have you started saving for retirement later in life? What strategies worked best for you? I’d love to hear your experiences in the comments below!