I am 53 and I have $46k in an employee 401k with a 3% match (I contribute another 3%), and about $30k in a Roth IRA that I haven't contributed to in 15 years (money went to kid's college fund). Should I..... - increase my 401K contributions to 6%, which would reduce my end of year tax burden and increase my refund and.... - dump the additional refund $$ into my Roth IRA? How screwed am I finally waking up at 53 realizing I wanted to retire at 65?

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First, thanks for having the courage to talk about your situation, and please know that you are not alone. There are a lot of people that are underprepared for retirement, and quite a few only come to the realization when they are much older than you. A recent study by the Employee Benefits Retirement Institute (EBRI), at retirement preparedness by examining households headed by individuals ages 35-64 that are seeking to cover 100 percent of the average costs for retirees with their same age-, income-, and family-status. The study finds that nearly 43 percent of households are projected to run short—and are not on track for “retirement success” --according to the model. Don’t despair though, there is a lot that you can still do. Many of us in the same situation will need to take a holistic approach to retirement planning that may include adjustments to work, lifestyle, and financial choices. Examples of some solutions that could be implemented individually or in combination might include:


Save more now

  • Maximize contributions – take advantage of what the rules allow for employer retirement plans, and IRAs (if eligible), especially if your employer offers matching contributions. For example, this year you can contribute up to $18,500 to a 401(k) plan, plus an extra $6,000 if you’re age 50 or older.
  • Automate savings – if your employer provides this option, consider making your contributions automatic by having them withheld from your paycheck. Consider also having your contributions increase along with any raises in your salary.
  • Pay off debt – especially if it’s high interest revolving debt. For example, have a plan to pay off existing high interest debt over several years, then continuing to save the payments toward retirement.
  • Maximize total household employment – this can be tough to do depending on your circumstances, but look at all possible ways to leverage your skills from everyone in the household to boost income. This could include a non-working spouse going back to work, or considering a second job.

Reduce expenses now

  • Housing and transportation - figures from the Bureau of Labor Statistics,, show that housing and transportation comprise about 50% of the budget for the average American household, across all age ranges. Although our house may be our “castle”, consider if you could save significantly more by rightsizing or relocating. The same goes for our auto and transportation expenses. Look at the total cost of ownership and consider lower cost alternatives.
  • Family obligations – more folks are nearing their own retirement while still carrying the financial burden from children or grandchildren, as well as obligations for parents and grandparents. Look at ways to reduce this burden, if possible, such as requiring children living at home to contribute more to household expenses.
  • Have a budget and control other discretionary expenses – it’s especially important to try to have a budget to know where the money goes, and to control the big expense items. For example, consider taking a car trip versus the more expensive cruise.

Other options that may be available to you now or at retirement

  • Delaying full retirement – working longer is one of the most effective ways to reduce the stress on your retirement nest egg. If possible, either postpone retirement or find part-time work in retirement.
  • Housing decisions – “right-sizing” the living conditions, relocating, adding a tenant, or cohabitating with family or friends. Consider not only the house but the neighborhood (or state).  Some states don’t tax military pensions for instance which could significantly assist veterans, or limit property taxes for seniors.  Savings on the expense side simply because of your state of residency can make a difference when cash flow is tight. 
  • Social Security claiming – given its importance, and assuming normal to longer longevity, plan appropriately based on joint-life expectancies (if married), and try to delay benefits if possible.
  • Other assets decisions – although it may not be appropriate or viable for everyone, consider utilizing home equity, such as through a HECM reverse mortgage, to potentially help bridge the income gap until Social Security is claimed, or to pay for unexpected health expenses.
  • Guaranteed income – consider trying to establish a guaranteed income “floor” that at least ensures coverage for your essential expenses. If the essential expenses are not covered by your current guaranteed income (e.g. Social Security or pensions), then look at filling the gap by creating your own “private pension” with annuities or other guaranteed solutions.

In summary, consider using some of these tactics to control what you can, and then enjoy life. Since this is such an important topic, it would be great to hear from others in the community on how they are dealing with this issue. See how much money you can afford to withdraw to make your retirement savings last by using the free USAA Retirement Planning Calculator.


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USAA or its affiliates do not provide tax advice. Taxpayers should seek advice based upon their own particular circumstances from an independent tax advisor.