What to Do If Your Retirement Savings Aren’t Where They Should Be at 55

Turning 55 can be a wake-up call for retirement savers. You’re only seven years from being eligible for Social Security (albeit at a reduced rate) and you’re 10 years away from Medicare enrollment. And while retirement might still seem far away, you don’t have unlimited time to make up for missing savings.

If your IRA or 401(k) isn’t where you want it to be by 55, you’re not alone. Many people reach their mid-50s feeling that they’re behind on retirement savings.

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The good news is that you still have time to change your financial outlook if your savings aren’t adequate. Here’s what to do immediately and in the coming years.

1. Boost your savings rate if your earnings have peaked

If you’re 55, you may be earning more money now than ever before. That means that even if you still have looming expenses, you may have more leeway to boost your IRA or 401(k) plan contributions.

Also remember that being 55 allows you to make catch-up contributions not just to your IRA or 401(k), but also to your health savings account, if you have one. So to that end, look closely at your budget and see if you can find ways to boost your savings rate. Cutting back a bit on discretionary spending could make a meaningful difference, especially if you do so consistently to boost contributions over the next five to 10 years.

2. Make sure your investments are working for you

The money you save for retirement shouldn’t just sit in cash. It shouldn’t even mostly sit in bonds at 55 unless you’re planning to retire within the next couple of years.

If you’re planning a workforce exit in your early to mid-60s, it means you might still have another six to 10 years for your savings to grow. So it’s important to make sure you’re still fairly concentrated in stocks.

Does this mean stocks should comprise 100% of your portfolio? That’s a no. But now’s not the time to reduce your stock exposure too heavily.

You still want stocks in your portfolio to generate strong returns. And if you’re eager to unload some risk, start gradually moving away from stocks year after year rather than make a drastic change to your asset allocation in a single month.

3. Reset your retirement timeline and expectations

You may have your heart set on a specific retirement age. It could be 62, 65, or something else entirely.

If you’re truly behind on retirement savings at 55 and you don’t see a path that allows you to catch up by your target retirement age, then you may need to rethink some of your plans. You don’t necessarily have to ditch your dreams entirely. But some adjustments may be necessary.

Let’s say your aim is to retire at 62 but you’re very short of the savings you’d need to support your lifestyle from that age onward. At that point, you have a choice.

You could delay your retirement. You could downsize your lifestyle so retirement costs less. Or you could do a combination of both, such as working one extra year and cutting expenses modestly. For example, rather than join a country club once you retire, find a gym with nice amenities at a fraction of the cost.

You may not have to completely upend your plans. But if the numbers don’t work, the sooner you come to terms with that, the sooner you can come up with another picture of what your retirement timeline and lifestyle might look like.

Finding yourself behind on retirement savings at 55 can certainly be stressful. But it doesn’t mean you’ve absolutely missed your chance to build a secure future. By increasing your savings rate, investing strategically, and reevaluating your retirement expectations, you can put yourself in a stronger position to manage well financially once your career comes to an end.

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