The Best Ways to Start Saving Money in Your 50s

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Written By Andrew Joseph Foster

Reaching your 50s can be a time of reflection, but it’s also an opportunity to take stock of your finances and make adjustments to ensure a secure future. Whether you’re planning for retirement, looking to pay off debt, or simply aiming to build a nest egg for peace of mind, it’s never too late to start saving money—especially in your 50s.

Here are the best ways to start saving money in your 50s and set yourself up for financial success.

1. Assess Your Current Financial Situation

Before you can take steps toward saving, it’s crucial to understand where you stand financially. Take a comprehensive look at your income, expenses, debt, savings, and investments. This means tracking every dollar that comes in and goes out of your account to see where you can make changes.

Create a budget: A solid budget helps you track spending and identify areas where you can cut back. This could mean reducing discretionary spending, such as dining out or subscription services.
Review your debts: If you’re carrying high-interest debt, such as credit card balances, prioritize paying this off. This will free up more money for savings in the long run.
Evaluate your emergency fund: A robust emergency fund (typically 3-6 months’ worth of living expenses) provides a safety net in case of unexpected financial challenges.

2. Contribute to Retirement Accounts

In your 50s, retirement should be a top priority. If you haven’t already been contributing to a 401(k), IRA, or another retirement account, now is the time to start.

Maximize 401(k) contributions: If your employer offers a 401(k) plan, aim to contribute as much as possible, especially if they offer a matching contribution. In 2024, the contribution limit for individuals under 50 is $22,500, but if you’re 50 or older, you can contribute up to $30,000 per year due to a “catch-up” provision.
Open an IRA: If you don’t have access to a 401(k), or if you want to supplement it, consider opening an Individual Retirement Account (IRA). Both Traditional and Roth IRAs offer tax advantages, though Roth IRAs require income limits and have different withdrawal rules.
Consider a Roth conversion: If your income has decreased in your 50s or if you expect to be in a higher tax bracket in the future, converting traditional retirement funds to a Roth IRA can be a smart move. You’ll pay taxes now, but future withdrawals will be tax-free.

3. Cut Back on Unnecessary Spending

As you enter your 50s, it’s essential to re-evaluate your lifestyle and spending habits. Small changes can make a big difference over time.

Review subscriptions and memberships: Cut out subscriptions you no longer use, such as streaming services, gym memberships, or magazine subscriptions. Redirect the money you save into your savings account.
Downsize where possible: Consider reducing housing costs by downsizing to a smaller home or renting instead of owning. This can free up significant funds that can go into savings or investments.
Cook more at home: Food is one of the biggest household expenses. Cooking meals at home instead of eating out can save hundreds, if not thousands, of dollars annually.

4. Focus on Paying Off Debt

For many people in their 50s, debt can be a significant barrier to saving money. Whether it’s mortgages, car loans, or credit card balances, paying down high-interest debt is a top priority. Here are some strategies to consider:

Debt avalanche method: Focus on paying off the debt with the highest interest rate first, while making minimum payments on others. This will save you the most money in the long run.
Refinance or consolidate loans: If you have high-interest debt, like credit card balances, refinancing to a lower rate or consolidating your loans can help lower your payments and free up funds for savings.
Pay off the mortgage early: If you're nearing retirement and have significant equity in your home, paying off your mortgage early can reduce your monthly expenses and give you more freedom in retirement.

5. Start Investing for Growth

If you’re not already investing, your 50s is the perfect time to begin. Even with a shorter time horizon until retirement, investing allows your money to grow more than it would in a savings account or under the mattress.

Diversify your investments: Don’t put all your eggs in one basket. Consider a diversified portfolio that includes stocks, bonds, and real estate. The right mix of assets depends on your risk tolerance and time horizon.
Consider low-cost index funds and ETFs: These investments track the performance of an entire market index, such as the S&P 500, and offer broad exposure to a range of stocks. They are typically lower-cost and require less hands-on management.
Maximize tax-advantaged accounts: Make full use of your tax-advantaged retirement accounts (such as 401(k)s and IRAs), and be sure to take advantage of any tax breaks available to you.

6. Take Advantage of Catch-Up Contributions

As you approach retirement, catch-up contributions can significantly increase your retirement savings. The IRS allows individuals age 50 or older to contribute more to their retirement accounts.

401(k): As mentioned earlier, you can contribute an additional $7,500 in 2024, bringing the total contribution limit to $30,000.
IRA: You can also contribute an additional $1,000 to an IRA, for a total of $7,500.

These catch-up contributions can help you make up for lost time if you started saving late.

7. Consider Working Longer or Picking Up a Side Job

If you’re behind on saving or just want to boost your retirement savings, consider working longer or taking on a side gig.

Extend your career: By working a few more years, you can increase your retirement savings, delay the need to draw from Social Security, and give your investments more time to grow.
Side gigs: Taking on part-time work, freelancing, or monetizing a hobby can provide extra income that can be used to fund your retirement accounts or pay down debt.

8. Review Your Health Insurance and Long-Term Care Needs

Healthcare costs can eat into your savings, especially as you get older. Review your current health insurance coverage and consider options like long-term care insurance to protect against unexpected medical expenses.

Medicare planning: If you’re approaching 65, start planning for Medicare, as you’ll need to enroll in this government program. Understanding the coverage options can help you manage your healthcare costs in retirement.
Long-term care insurance: Consider whether long-term care insurance makes sense for you, as it can help cover the cost of extended care if needed in later years.

9. Set Realistic Financial Goals

Setting clear, actionable financial goals is key to staying motivated and focused. Whether it’s saving for a specific retirement target, paying off your mortgage, or setting aside a certain amount for travel, having concrete goals can help you measure your progress and stay on track.

Conclusion

Saving money in your 50s is not only about cutting back and prioritizing your financial goals—it’s about taking proactive steps that will secure your financial future. By starting now and making small but consistent changes, you’ll be better prepared for retirement and any financial challenges that may come your way. Whether it’s reviewing your budget, maximizing retirement contributions, or eliminating high-interest debt, it’s never too late to start saving for a brighter, more financially secure future.