Saving Strategies for Your 40s and 50s

Saving Strategies for Your 40s and 50s

The average American’s earnings peak at some time between 45 and 54 years old, so the potential for saving at this stage of life is high. This may be particularly fortunate timing, since midlife is also the time when people’s thoughts tend to turn toward retirement: How much money will I have to live my best life when my career is behind me?

If you’re in your mid- to late 40s or early 50s, having savings goals and a solid strategy for reaching them is important, especially because you also have expenses that are competing for your dollars — paying off your mortgage(s), funding your child(ren)’s education or continuing to grow your business, for example. But with careful planning and disciplined follow-through, you can set yourself up for a comfortable retirement even as you navigate your current expenses.

Establish or revisit your savings goals

By now, you probably have a pretty good idea of what you’d like your retirement lifestyle to look like. Will you travel? Buy a vacation home? Focus on your favorite hobby or cause? Start a small business? Whatever that picture looks like for you, break it down into dollars and cents. Think about how much you will need to make your retirement dreams come true.

If that’s easier said than done, here are some guidelines to get you started. Conventional wisdom suggests that, by age 45, you should have about four times your salary saved for retirement; by 50, six times your salary; and by 60, eight times your salary. Of course, these guidelines represent average retirement savings goals. You may want to adjust them depending on your plans. For example, someone planning to travel the world once they retire is likely to spend more than someone who chooses a quieter retirement, staying closer to home.

Assess your savings position

Next, take stock of your savings today so you can gauge how much you should be saving going forward. Be sure to include a look into all your retirement savings accounts, as well as other savings accounts you may have, with the exception of your emergency, or rainy day, fund. (Your emergency fund should be earmarked for unexpected costs — a job loss or unforeseen medical expenses, for example. Dollar Bank’s Rainy Day Calculator can help you see how much you should keep in this fund — generally, at least three to six months’ worth of your living expenses.)

Make saving a priority

Now, create a plan for supercharging your savings. These ideas may help:

Put your money to work for you. With a wide range of interest-bearing savings accounts, certificates of deposit (CDs) and checking accounts to choose from, you can build your savings effortlessly. Some people choose to open several savings accounts so they can easily gauge their progress on multiple goals at once; you may have one account to save for travel, another for starting a small business and yet another for making home renovations, for example.

Automate your savings. Setting up automatic deposits from your paycheck, or periodic transfers from your checking account, to your savings account(s) can make it easier for you to save consistently. Set the amount and frequency of transfers, and watch your savings grow!

Stick to your budget. This is a good time to reevaluate your monthly budget to see where you may be able to trim spending and allocate more to savings. Take a good hard look at how well you are sticking to your budget, too. A budget can be a great tool, but only if you commit to following it.

Pay off high-interest debt. Every dollar you’re paying in interest charges for credit card balances or other high-interest debt is a dollar that could be earning you interest if you saved it instead. Work toward paying down your debt to free up more of your money for savings. The debt avalanche and snowball methods are two options for accelerating the repayment of debt.

Boost your retirement account contributions. If your current retirement savings balance falls short of your goals, make sure you are taking full advantage of any employer match your company may offer. Then consider making larger contributions to your 401(k), 403(b) or 457 plan and/or your individual retirement account (IRA) to the extent permitted by the Internal Revenue Service (IRS). For 2024, the IRS allows an annual contribution of up to $23,000 for 401(k), 403(b) and most 457 plans; if you are 50 or older, you may make an additional $7,500 catch-up contribution. The 2024 contribution limit for an IRA is $7,000, with a $1,000 catch-up contribution for those 50 and older.

Track your progress. Staying tuned in to your savings progress is important to not only your success in reaching your goals but also your motivation to keep pressing on. Once you get into the habit of intentionally saving and see the positive results you can achieve, you may be inspired to save more and more. That’s good news for your lifestyle of the future and your peace of mind today.

Visit your local Dollar Bank office or call us at 1-800-242-2265 to talk with one of our banking experts about developing a savings plan to help you reach your financial goals.