Nearly 50 with hardly any savings?

’Nimi Akinkugbe

Are you on the other side of 45 with little or no retirement savings? Have you ignored this most important stage of your life and suddenly find that retirement is looming? Very few of us save enough for retirement and most people will fall short. Research has suggested that retirees will require about 60 to 70 per cent of their pre-retirement income, to maintain their standard of living during retirement.

There are so many diverse reasons why people find themselves in this precarious position. Some have simply lacked the focus or discipline to save, whilst others find themselves at the centre of some catastrophic life event such as the loss of a loved one, a major illness, disability or divorce that can have dire financial consequences.

Be realistic about your actual situation. Start by pulling together financial information such as your bank and investment statements, and your projected pension pay-out or a gratuity if you are fortunate enough to have one. Take stock of all your assets. How much income will you need in retirement? There are several good online retirement calculators to help with this exercise; a rough estimate will do and even then, be very conservative in your estimations. Where can income could possibly come from?

How much are you spending today? You will need to cut back drastically on any unnecessary expenses. If you have still got dependent children and elderly parents to support, prioritize and do only what absolutely must be done. If you have become the go to person for bailing out members of the extended family and friends, you really must learn to say no. Retirement savings must become your priority and non-essential expenses like regularly eating out and shopping must take a back seat.

Seek professional advice. A financial advisor will dispassionately consider your current and projected circumstances. Try to reduce your debt to free up funds over time. An advisor will recommend various options that might include an automated savings plan where funds are debited directly from your salary and into savings; this could include fixed income, balanced or equity funds as well as other investment vehicles.

Don’t be too aggressive in your attempt to make up for lost time. Volatility is a reality in investing; as retirement approaches, there is little room for error and one must be more conscious of protecting the nest egg from the risk of loss; a severe market downturn can be disastrous as you will have far less time for the market to correct itself or for you to recover from poor investment decisions. Stocks do promise larger returns on investment but over the long term.

At the same time you can’t afford to be too conservative and have inflation eat away at all your savings. Bear in mind that many retirees still have over twenty years to fund and should continue to have a long-term view; thus you still need at least a portion of your portfolio in stocks until retirement, when it is usual to want to scale back your equity exposure and seek more conservative income generating securities.

Do you have equity in your home? If your children have left home and you are not too distracted overwhelmed by attachment, a house that has appreciated in value can be sold and a smaller less expensive home purchased in its place. You may choose to downsize or relocate.  Obviously most retirees would rather not have to start a new life somewhere else, but many do opt to move, and some even go abroad in the quest to improve their living standards at lower costs.

If it is your intention for your home to be the source of some of your retirement savings, be mindful of the fact that there is no guarantee that you will be able to sell the house when you need the money. This could force you to sell it for less than it is worth.

If you done all your sums and clearly still won’t have enough in retirement; you have two choices: You may need to scale-back your retirement goals and lifestyle drastically, or you may have to postpone your retirement date. Don’t view this as a failing in anyway. You are not alone and more and more people are working past the traditional retirement age.

Working a little longer or part time can improve your financial prospects significantly, as you will be able to invest these earnings and feed your retirement portfolio until you have to dip into it. Staying at work longer, will also keep you active, more socially connected and engaged. Plan for your retirement independent of your spouse other family members’ provision. They may not be able to help.

Can you create another stream of income to devote to retirement savings? Most people have a talent or skill that they are naturally good at or enjoy doing. Explore your options; it may well be something that you may have taken for-granted and would do for free, that could turn into a side business. This could include tutoring or teaching a musical instrument. With all your years of experience and some creativity you should be able to leverage on your skills.

You cannot make up for an entire career of not saving by trying to fast track in the last 10 years of your working life. No matter how precarious your finances might be approaching retirement, there is always some way to improve your situation. Don’t let doubt or discouragement keep you from starting right away, regardless of your age. All is not lost, but time is a critical factor so don’t procrastinate.