When it comes to building a strong financial foundation, money guru Dave Ramsey believes that age or starting late is not a factor - and that one can be stable with just a few, wise financial decisions.
This is what Ramsey told a 50-year-old woman who has been widowed for 15 years, who recently called the Dave Ramsey show seeking advice on how to save for retirement. She helped put her children through college and ran the household singlehandedly for over a decade.
She disclosed that her responsibilities didn't allow her to prioritise her life goals, including retirement plans. Although she now has the bandwidth to start building retirement savings, she is clueless about where to begin, the investments to make, and how much she should contribute to them every month.
Ramsey Presents a Straightforward Solution
Upon hearing about the woman's financial ordeal, the financial guru disclosed a simple formula to help her situation. He explained that if she saves and invests $1,000 monthly for 15 years starting today, she'd have assets worth almost $500,000 at age 65.
However, Ramsey clarified that she won't be rich, but half a million dollars will ensure she doesn't spend her retirement cold and hungry. While the strategy can help reach a more stable state by retirement, there are several more ways the widow can try to boost her savings further.
Aside from this tip, here are other ways to help you build a nice honey pot even later on in life:
Leverage Catch-up Contributions
Americans age 50 or older can make extra contributions to their tax-advantaged retirement plans like 401(k)s or individual retirement accounts (IRAs) on top of the annual contribution limit to cover lost time. In 2024, 401(k) account holders can contribute a maximum of $23,000.
However, those 50 and older can invest an additional $7,500 as catch-up contributions to take the total amount they can put into a 401(k) to $30,500. People without access to 401(k)s can contribute up to $7,000 annually into IRAs in 2024. However, those above 50 can contribute an additional $1,000 or $8,000 to the tax-deferred retirement account.
If the woman on the Dave Ramsey show maxes out her 401(k), considering she has one, starting at the age of 50 until 65, she could amass a fortune north of $800,000, considering annual investment returns of 8%.
Hire A Financial Adviser
Starting retirement planning from scratch at age 50 could be intimidating for most. A person's risk tolerance generally tanks as they age, making investing in growth stocks in a volatile market difficult. The situation becomes more complex if you lack financial knowledge.
Hence, it is imperative for the widow to hire a financial adviser following fiduciary standards because these experts are mandated by law to work in the best interest of their clients. Experienced advisers help create a comprehensive, customised financial roadmap that matches your financial situations and goals.
Certified financial planners can help optimise capital allocation, offer exposure to growth stocks while hedging market risks, and navigate financial pitfalls during economic upheavals. This way, you can stay on track till you retire while ensuring you are not being misguided by advisers into buying products that benefit them or paying exorbitantly high fees that many charge.
Finding the right financial adviser is crucial since these relationships last for years and could make or break your future dreams. SmartAsset, a billion-dollar company, is solving the problem of finding advisers that suit client needs by matching you with up to three vetted fiduciary experts when you fill in a brief online questionnaire.
SmartAsset's concierge team will arrange for you to speak with the advisers for free, empowering you to decide if they are right for you. The company claims to match over 50,000 people with fiduciary financial advisers every month.
Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.
