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5 Keys to a Late-Start Retirement Plan

It's not too late to get back on track with your savings

By Cliff Goldstein | MarketWatch | August 21, 2014

(This article appeared previously on MarketWatch.com.)

If you're a late starter in the race to retirement, it may require a bit of a sprint to hit the finish line — but it can still be done.

The reality is, you're really not that far behind. More than one-third (36 percent) of Americans surveyed last year by the Employee Benefit Research Institute said they had less than $1,000 saved for retirement. Fully 60 percent reported having less than $25,000 set aside for life after work. With a little effort and commitment, you can lap the field.

There are five ways to do it:

1. Lower Your Investment Costs

First, consider the investments you do have and make sure they are cost-efficient.

“Start building a diversified global portfolio using low-cost ETF models,” suggests Robert Riedl, a wealth manager in Milwaukee. Lower-cost investments, such as Exchange-Traded Funds (ETFs) not only put more money in your pocket after expenses, but research indicates lower fees can mean higher returns.

Morningstar, the mutual-fund research company, conducted a study in 2010 that revealed low-cost funds beat high-cost funds in every asset class over every time period. In short, the study concluded, “Expense ratios are strong predictors of performance.”

When it comes to saving for retirement, if you have a long way to go and a short time to get there, consider choosing lower-cost investments.

(MORE: How to Choose the Right Index Funds and ETFs)

2. Reconsider Your Portfolio's Risk

Conventional wisdom says: The older you get, the less risk you should assume in your investment portfolio. Johanna Fox Turner, a CPA and financial planner in Mayfield, Ky., says late-start retirement savers may need to rethink that strategy.

“Don't automatically dial back your portfolio to the stereotypical 60/40 stock/bond ratio,” she says. “Retirement is long term and your portfolio should be too.”

(MORE: What to Do When the Market Crashes)

3. Delay Social Security

“Look at delaying Social Security to allow for more time at work [and to continue] contributing to retirement plans,” says Chris de Lorimier, an investment adviser representative in Pasadena, Calif.

Richard Rosso, a money manager in Houston, likes that advice and adds, “Wait on Social Security or implement 'file and suspend.'“

Research conducted by Financial Engines found that most (60 percent) of retirees claim Social Security benefits as soon as they are eligible, at age 62. However, delaying filing will allow an increase to your benefits of 0.5 percent percent every month until age 70. That results in a cumulative increase in benefits of 72 percent over the eight-year span from age 62 to 70. And the benefit will likely be adjusted even higher for inflation.

(MORE: Most Claim Social Security Too Soon)

4. Downsize and Cut Expenses

“I advise clients in this situation not to be discouraged,” says Andrew Comstock, an investment manager in Leawood, Kansas. “It is crucial not to delay if they are off to a late start and to budget as much as they can for retirement. They may have to reduce certain expenses to increase contributions to retirement accounts.“

Kimberly Howard, a financial adviser in Denver, Colo., agrees with Comstock, but takes his idea one step further. “Saving is only a part of the puzzle,” she says. “Cutting expenses is a key component. Expense reduction can be done before and during retirement.”

5. Keep Saving

The panel of advisers we consulted agreed: It's never too late to start saving for retirement. The consensus was, whatever you can save now will help — even if just a little — when you retire.

And to that point Rosso adds: “If you are older than 70 1/2 you cannot contribute to a traditional IRA, but you can still contribute to a Roth IRA at any age.”


Cliff N. Goldstein is a member of the personal finance team at NerdWallet, an unbiased source of tools and information aimed at helping consumers make smarter financial decisions. He previously worked as a financial investment professional in the Private Wealth Management division at Goldman Sach. Follow Cliff on Twitter @CliffNerdWallet.