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Last chance for a 6-figure retirement
I've left saving for retirement really late. Is there any way I can make up for it?
July 22, 2005: 12:41 PM EDT
By Walter Updegrave, CNN/Money contributing columnist
More information on Updegrave's new book.

NEW YORK (CNN/Money) - I'm hoping to retire in 13 years, but I made the mistake of not setting aside any money for my retirement. Is there anything I can do now to make up for that blunder?

-- Brandon Robins, Chicago, Illinois

First, if it's any consolation, you're not the only person who's made such a blunder. There are plenty of people coming into the final stretch of their career who are only now beginning to realize that they're woefully unprepared for retirement.

Indeed, in a recent conversation I had with Tim Rowland, a financial planner in Scottsdale, Arizona, he told me that in his experience "many people don't even begin to think seriously about retirement until they're 45 or so. And then they often don't start doing something about it for another 10 years. Fifty-five is when people really start to get serious."

Clearly, that's not an ideal situation to be in. As I've written many times in this column, the single best thing people can do to assure a comfortable retirement is to get an early start on planning in general, but especially on saving and investing.

The earlier you begin, the more time your nest egg has to grow through the wonders of compound interest, and the more secure and enjoyable your retirement is likely to be.

Alas, for a variety of reasons, however, many of us don't get that leg up on retirement planning. But that's no reason to despair. You can still regain at least some lost ground during that final 10- to 15-year home stretch into retirement and in the process dramatically improve your retirement prospects.

Start saving immediately

The most important thing you can do now to improve your situation is to start saving immediately. As The Doors so famously put it in "Light My Fire," "the time to hesitate is through, no time to wallow in the mire." Granted, Jim Morrison wasn't talking about retirement, but you get the idea.

If your company offers a 401(k) or other retirement savings plan, contribute the max. If you qualify for an IRA -- either a traditional or Roth -- contribute as much as you can there too (up to $4,000 this year). And if you're 50 or older, try to take advantage of those catch-up contributions too (an extra $4,000 this year in 401(k)s and another $1,000 in IRAs).

You'd be surprised at how large a nest egg you can build even in just 10 years if you do some serious saving. As I point out in my July Long View column ("Playing catch-up with retirement savings") in MONEY Magazine, it's quite possible to accumulate a six-figure retirement portfolio within 10 years even if you're starting from scratch.

Two more moves

I mention two other moves in that column that can also enhance your retirement security.

The first is avoiding taking on new debt in the years leading up to retirement and, if possible, paring down debt you already have so you don't go into retirement burdened with big interest payments.

The second move I recommend is that you re-assess your investment strategy. Typically, individuals invest more conservatively as they approach the end of their careers. That makes sense because you don't want to take big risks with the nest egg it's taken a lifetime to build.

But if you're still trying to build your retirement portfolio, you may have to be more intrepid in your investing.

That doesn't mean throwing all your money in high-octane tech stocks. But it might mean investing a larger portion of your money in stocks than you otherwise would, although you should make sure that the core of your stock holdings are stable blue-chip companies.

Even these moves may not be enough to allow you to retire in comfort on the schedule you would like. In that case, you may need to resort to other strategies, such as postponing retirement a couple of years to allow your portfolio's value to grow more or even relocating to an area with lower living costs.

I devote an entire chapter to catch-up strategies in the recently released paperback version of my book, "How To Retire Rich In a Totally Changed World: Why You're Not In Kansas Anymore".

To sum up, the time to hesitate is through. If you want a decent shot at retiring in comfort in 13 years, you've got to start saving, investing and planning now. Do that and you should have enough time to make up for your blunder and significantly improve your chances of having a secure and enjoyable retirement.

Walter Updegrave is a senior editor at MONEY Magazine and is the author of "We're Not in Kansas Anymore: Strategies for Retiring Rich in a Totally Changed World."  Top of page


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