It’s relatively easy to save for retirement when you’re still young. Five thousand
dollars set aside for a new baby grows to an amount that generates over a $100,000
a year in current-day dollars if the money earns 12 percent annually and inflation
runs at 3 percent.
NOTE The data is a little sketchy, but small-company stocks probably deliver
average returns of around 12 to 13 percent over long periods of time. Small-
company stocks are, however, very risky over shorter periods of time.
The flip side of this is that it becomes difficult to save for retirement if you start
thinking (and saving) late in your working years. If you’re 60, haven’t started saving,
and want $25,000 a year in income from your retirement savings at age 65, you
probably need to contribute annually more than you make.
Say you’re in your 50s—or even a bit older. With the kids’ college expenses, or
perhaps a divorce, you don’t have any money saved for retirement. What should you
do? What can you do? This situation, though unfortunate, doesn’t need to be
untenable. There are some things you can do.
Just say no
One tactic is not to retire. After all, you save for retirement so the earnings from
those savings can replace your salary and wages. If you don’t stop working, you
don’t need retirement savings to produce investment income.
Note, too, that “not retiring” doesn’t mean you need to keep the same job. If you’ve
been selling computers your whole life and you’re sick of it, do something else. Get
a job teaching at the community college. (Maybe you’ll get summers off.) Join the
Peace Corps and go to South America. Get a job in a daycare center and help shape
the future.
Give yourself breathing room
A second tactic is to postpone retirement a few extra years, which, of course, also
reduces the number of years you’re retired. Rather than working to age 62 or 65,
for example, working until age 67 or 69—a few more years of contributions and
compound interest income—will make a surprising difference, and you’ll boost
substantially the money you receive from defined-benefit retirement plans. If you’re
paying a mortgage, maybe you can pay that off in those few extra years, too.
Redefine your sense of affluence
A third and more unconventional tactic is to decide that less is more and tune into
the art and philosophy of frugality. A good book on this subject is Your Money or
Your Life by Joe Dominquez and Vicki Robin (Viking Penguin, 1992). And if you
decide to live on less while you’re still working, you’ll end up saving a lot more over
the remaining years you work.

Bellevue WA certified public accountant
Stephen L. Nelson CPA has written more than 150 books. His bestselling book is
Quicken for Dummies, which sold more than 1,000,000 copies. His books have sold
more than 4,000,000 copies in English and have been translated into more than a
dozen other languages.

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