If you’re playing catch up retirement savings, here are 59 wealth building tips and solutions that can radically change late retirement planning.
After personally making thousands of investments among stocks, bonds, funds, and real estate, both with and without financial advisors over the past 40 years, and creating alternative income streams to replace career income over the past 15 years along with my husband, I’m sharing what I learned about catch up wealth building strategies.
The older you get, the scarier it feels to not have enough money to live comfortable in retirement. It can feel like you’re continuously playing catch up retirement savings while subject to the whims of the economy, your boss, or stock market uncertainties.
These aren’t your usual give up lattes, buy an annuity or cut out the things you enjoy in life to save a few bucks.
Use Wisdom from Past Mistakes to Catch Up Wealth
Let’s face it. By the time you’re playing catch up wealth building, you’re probably well into or past midlife, so you’ve made a few mistakes with your investing. Accepting that everyone has made investment mistakes, including the top financial advisors and wealth managers, will help you let go of the guilt and shame that often accompanies investment mistakes.
The great thing about messing up royally is that you usually don’t make the same mistakes! Instead of being guilt triggers, use the lessons learned from past mistakes to help you build wealth from this moment forward.
Avoid Too Large a Position in One Stock
Many investors over 50 who have worked for the same company a long time end up with too large a position in one stock. Having a disproportionate position in one company’s stock increases risk and limits investment capital to use to catch up retirement savings.
The solution is to diversify.
Have Different Kinds of Investments
Having too much net worth in one kind of investment also limits other opportunities and increases risk. This happens a lot with stocks since they are considered the main way to invest in traditional retirement planning.
Investors who have a lot of fear over losing money can do just the opposite by having too much invested in money market or other cash type of funds.
While no risk investments become even more important in retirement, having too much cash hinders the ability to catch up retirement savings. Again, the solution is to diversify, possibly into alternative investments.
Plan B for Catch Up Wealth Building
Having enough money for retirement is too important to not have a Plan B in case your original retirement plan falls short. This website is full of Plan B ideas, since we decided began alternative retirement investment strategies in our 50’s.
Alternative investments, lifestyle changes, and starting a small business are all potential Plan B ideas that can completely change your financial future.
Alternative Retirement Investment Strategies
Sometimes traditional retirement planning with long term buy and hold investing using a standard asset allocation works. Then sometimes investors discover later in life that this passive investing strategy isn’t working.
This is where alternative retirement investment strategies can come to the rescue, including alternative investments and more proactive investing for catching up retirement savings more strategically.
Plan for Bear Markets in Retirement
One of my least favorite phrases is “if there is a bear market”. For stock investors, bear markets are as sure as death, only they come many times during your life, not just once.
This means bear market will happen when you’re investing for retirement as well as when you’re living off investments in retirement.
It’s important to accept this reality and plan around it, especially in late retirement planning.
One problem with traditional asset allocation investing is that investors over 50 are often encouraged to stick with a low percentage of cash in portfolios, regardless of stock market valuations, so they can catch up retirement savings but this can be risky.
Define Acceptable Portfolio Risk
Not losing money is as important as building wealth, especially the closer you get to retirement. For this reason, it’s important to realistically define how much of a drop in your portfolio (in dollars and percentage) you’re willing to endure for the sake of catch up wealth building after 50.
This will allow you to be at peace with stock investing no matter whether the markets are soaring to new highs or dropping to new lows.
Think Differently about Wealth Building
The same thinking that got you here won’t get you to the level of net worth that you want to have so you can retire comfortably one day.
If you’re playing catch up wealth building, this awareness sets the stage for progress. Be prepared to think and act differently if you want to reach financial independence.
Maybe the way to increase your net worth is with at least one alternative investment strategy. Or maybe it will happen from creating an extra income stream that you can save or use to live in retirement.
It all depends on your situation.
Be like a kid in a candy store.
Opportunities are everywhere.
Know How a Bear Stock Market Will Affect You
If you’re unsure about how much risk you have in your stock portfolio, click here to read my article How Will a Stock Market Crash Affect You?
Be sure to spend a few minutes calculating your Stock Drop Factor now. Bookmark the page so you can repeat this easy but powerful process as stock markets soar or swoon to avoid help you avoid making emotional investment mistakes.
Making decisions from a place of knowledge and planning helps with wealth building because it lessens feelings of fear during bear markets and greed during bull markets.
Take Advantage of Cheap Assets to Catch Up Savings
Once or twice every decade the price of quality assets drops to bargain basement prices after bear markets. This is usually due to normal overall market cycles.
This is one of the best ways to catch up retirement savings simply by taking advantage of undervalued assets during such times as explained more below.
The key is to be prepared by having a higher percentage of portfolio cash to invest in stocks or other assets at low valuations. Click here to read my post What Percentage of Cash Should My Portfolio Have?
Continue Investing to Catch Up Savings
Wealth compounding is the still easiest way to build wealth over time for investors with the gift of time.
And as an investor over 50, it can get really annoying that so much investing information is geared toward simple buy and hold investing for several decades, when you don’t have decades to save before retirement.
But even for investors over 50, all is not lost. Investing in undervalued assets near market cycle lows, creating new income streams and shifting to alternative investments are all potential solutions to catch up retirement savings.
Plus, investments can still grow and compound for another few decades assuming good health, especially if you have alternative retirement income strategies that lessen the need to live off savings.
Reality Checks about Catching Up Savings
By updating net worth and doing some realistic estimated projections with a retirement planning calculator, investors can see if they’re roughly on track to catch up savings to the level needed to retire by the desired age. (See below about using estimates in retirement planning calculators.)
The earlier potential problems are identified, however, the more time there is to catch up retirement savings or maybe even speed up planned retirement age.
Understanding Investment Returns
When averaging returns over several years, adding in the one or two years prior can significantly change the returns. This means that investment returns can be presented in the best possible way to make them look better than they are.
For example, in 2018 when 2008 fell out of the 10 year performance returns for stocks, investment returns suddenly appeared significantly better.
Also, long term averages hide big swings in investment returns in a single year.
The solution is to view investment returns for each year instead of one big average, in every year since inception.
It’s also important to understand returns from income vs capital gains vs reinvesting.
By clearly understanding how returns are measured and displayed, it’s easier for investors to make the best investments for catching up retirement savings.
Lead Your Wealth
Habits of investors leading their wealth are tracking net worth, understanding investing, and making conscious choices about risk vs reward to lead their wealth building.
Habits of investors giving away their money power are not doing the above.
Sometimes investors even hire a financial advisor to avoid having to do the above because they are too busy or not interested.
But leading your wealth requires doing the above good habits and then hiring a financial advisor if you choose to use one with the knowledge gained from those habits.
This is the only way to know if you’re making good investment choices before you’re any older. And it’s how to play catch up wealth building with alternative investment strategies other than stocks and bonds.
Checking the Overall Market Before Investing
Checking valuations in the overall market provides valuable insights for how much the market will return in subsequent years.
This free and easily found data provide very insightful information, especially for late retirement planning.
Crediting the Overall Market Not Investment Strategy
When growth stocks are purchased and held during a strong rising market (bull market), investors can mistake excellent stock picking skills for catching the cycle at the right time by chance.
This common investment mistake happens when evaluating our own skills as investors, or when evaluating financial advisors and investment funds.
The solution is to compare investment returns to the related index fund (benchmark) and give credit where credit is due.
The Right Investment at the Wrong Time
The best funds, financial advisors and investment strategies often have poor returns when their specific investment strategy is counter to the overall market, the economy or other macro (big) trends.
The solution is to be aware of the different types of risk an investment has, and by checking the overall market trend and valuations before investing.
Inflation in Planning for Retirement
Inflation is an invisible force that depletes the value of your money. This means $100 will buy much less in 10 years than what it will buy today, on average, about 3% every year.
Not only this, but many investments lose value simply due to inflation. Inflation has been less in recent years, around 2% but even at 2% it is worth consideration in planning how much money you need to retire.
By having investments that increase in value along with inflation, investors can protect themselves. In late retirement planning, investors can plan for inflation to avoid this investment mistake.
Almost all bonds are subject to inflation deterioration. Real estate rentals, on the other hand, are good inflation hedges since both property values and rents can rise in tandem with inflation.
Click below to watch my video on inflation….but keep reading:)
Keeping Wealth Management Fees Low
Paying higher fees than needed for a comparable investment is a waste of money. Lowering investment fees is an easy but important element in catching up retirement savings since adding another 1 to 2% every year can be significant.
Investing Besides Stocks and Bonds
Sometimes stock and bond investments alone won’t get investors to the level of savings they need to live off investments in the future.
Alternative and or income generating investments that supplement retirement income can completely change the amount of savings you need to retire for the better.
Click here to read my post Income Producing Assets That Shine with a list of alternative investments.
Having a Personal Wealth Plan
Not having an overall wealth plan is like taking a trip without knowing where you are going. Taking time to define how much money you want by a certain age along with your desired lifestyle costs guides investors to the best way to have enough money in retirement.
It will also set a measurement tool for progress toward your retirement goal.
Tracking the amount investments increase or decrease once every quarter or so pulls investor’s attention to improving results. It also provides the foundation for making investment strategy changes when needed and measuring the results of those changes.
Net Worth Is the Foundation
Many investors carefully track their investment portfolio but not their net worth yet net worth is the foundation for strategic retirement planning.
Net worth and investment tracking are closely related but different. By updating net worth at least once a year or following any major change investors can know this important number.
Realized and Unrealized Losses
When an asset is sold a real (realized) gain or loss is created. In the meantime, you just have ups and downs in the value of investments, which are unrealized gains or losses.
Unrealized gains and losses, also, however, affect net worth at any given time. Investors have been programmed to think that unrealized losses in stocks aren’t important since stocks will eventually “bounce back”. They will, but but the associated decline in net worth can cause problems especially for investors near retirement.
Paying High Fees for Index Performance
Investing in a stock index is investing in a stock index. In other words, there are no special talents needed that support higher than minimal fees for index investing since the shares in the index are purchased initially by a fund manager and then require only a handful transactions each year, if that.
Yet millions of investors pay 2% for index investing when it can be done for .10% or less. When paying for wealth management, pay for exceptional returns you cannot otherwise reach on your own, not index investing.
Planning on 10% Annual Returns from Stocks
The long term return of the stock market is an average of about 10% a year. Many investors forget this 10% average is made up of often wild swings under and over 10% in their retirement planning.
For example, the S&P 500 index dropped around 50% in the 2007-2009 bear market and in 2013 it was up over 32%. Investors can’t plan for a steady annual return of 10% a year.
Living Off Dividends Reduces Stock Returns
The S&P 500 index 10% annual return number includes dividends that are reinvested right back into the index and compounds over time. This means for retirees planning to live off dividends, the 10% return number is not relevant for future growth projections the dividends will be used to pay living expenses.
Using a investment calculator that can exclude dividends from annual returns provides more reliable data for retirement planning.
Bonds Can Tank Retirement Savings
While bonds can increase in value during bear stock markets thereby lowering overall investment risk, bonds also have risk
Intermediate and long term bonds decrease in value when interest rates rise. Bonds can also loose value from inflation. There are other risks in bonds, too.
Understanding bond risk nails this often overlooked risk in catch up retirement planning.
Keep Your Money Power
It can feel great to hand the role of investing your money over to someone else. Often investors, however, give away their power when they don’t know enough about investing to choose the best financial advisor or wealth manager for the job.
This often happens with investors over 50 since they tend to have more wealth, and they also tend to get more stressed about catching up retirement savings the older they get.
Truly understanding investing basics and having an overall wealth plan can lead to smarter choices for investors wanting to hire a wealth manager.
You May Be the Best Person to Assuming Someone Else Can Invest Your Retirement Savings
Allocating a percent of your money to stocks, bonds and a money market is just not that hard. Assuming someone else can do this better than you for a lot more money may not be the case.
Avoiding Herd Mentality
This quote was from Baron Rothschild in the 18th century.
Warren Buffett has a similar message with his quote to be fearful when others are greedy and greedy when others are fearful.
This lucrative investing mindset is impossible when following the herd.
The way to avoid this common investment mistake is to invest from logic instead of emotional investing which comes from fear or greed.
The Past Decade’s Performance May Not Repeat
Fueling the drive to plan for unrealistic investment returns, recency bias leads investors to think what has happened in the past few years will happen in the next few years. Usually, the opposite is true.
Understanding stock valuations and natural economic cycles, and how they affect the value of investments can play an important role in catching up retirement savings.
Consider Home Values in Diversification
While home values are not a part of your investment portfolio, they are usually a big part of net worth.
Home values also tend to increase or decrease, often significantly, based on market cycles and the economy. Investors can factor the risk of owning their home into their overall investment risk so they are not caught off guard when their net worth drops as a result of both investments and home values declining.
Be Cyber Safe
All the catch up savings strategies in the world are worthless if your savings get stolen.
While paper statements via the mail definitely have security risks, logging into investment accounts while using unsecured WiFi and using passwords that are not encrypted put investment accounts at unnecessary risk.
This is a huge and often overlooked investment mistake that can wipe out retirement savings in an instant but is easy to remedy.
Following cyber security protocol such as using only secured or private WiFi, making encrypted passwords (such as 3dcP!94aqP9mTzpr3Lw) and two factor authentication can make investment accounts safer online.
The Importance of Risk Management
Checking the typical downside is as important as the potential upside when evaluating an investment or reviewing your retirement savings plan for risk.
Understanding potential risks of investments can help investors be prepared when the unexpected happens.
Create Diversified Income Streams
The foundation of traditional investment retirement planning is based on spending savings with regular retirement withdrawals along with investment income, which is usually low.
Creating one or more diversified income streams from a different source significantly lowers the risk of running out of money in retirement. This can also catch up retirement savings by making investments in (or creating) assets with the potential for capital gains.
This alternative retirement strategy allowed us to retire in our 50’s.
Investing with Too Little Risk
While there are times when it pays to significantly lower risk, habitually investing in only no risk assets out of fear hurts investment returns.
The solution is to have an overall wealth plan created with a consideration of acceptable risk.
A 4% Retirement Withdrawal Plan May Not Work
Following the horrific 2000’s decade, a safer 2% to 3% retirement withdrawal rate replaced the older 4% retirement withdrawal rate from the 1990’s.
The reality is that what will work for living off investments in retirement depends on many factors, such as the economy and related market cycles right before and right after retirement, net worth levels and asset allocation.
Considering all of these factors in retirement planning will help avoid this investment mistake that would be discovered after it’s too late.
The percent you plan to withdraw will show how much you need to catch up retirement savings so you don’t run out of money.
Lower Investment Risk
Having too much investment risk, especially after 50, can seriously impair efforts to catch up retirement savings. Understanding all the different types of potential risk in both your investments and your net worth can help keep risk within the levels you have defined as acceptable.
Understanding investing isn’t hard, it just takes a little time and commitment to embrace one of the two (health and wealth) most important determinants of quality of life.
As such, the lack of interest baffles me. Understanding leads to better results in building wealth most of the time. (See mindset below.
Since taxes are often the largest single expense many people have, they can have a huge impact on how much money you need to retire.
Plus, investment returns can only be evaluated accurately based on after tax returns. Knowing how income and capital gains will be taxed is the solution for this common retirement planning oversight.
Hire a Financial Advisor for the Right Reasons
Many investors hire a financial advisor based on factors besides investment returns. Realizing the primary reason for investing is having funds for life and knowing how to evaluate investment returns can make a huge difference in catching up retirement savings.
Many investors make emotional investing decisions that are based on fear or greed instead of using data and information. The best way to overcome this common investment error is to identify the root of emotions related to money, and replace them.
Not Planning for Extraordinary Expenses
For most people, the goal of investing is having enough money to live off investments for many years in retirement. This goal is usually a factor of living expenses.
Extraordinary expenses are easy to overlook in retirement planning but they can ruin an otherwise very solid plan.
Click the to watch my video on how I handle extraordinary expenses.
Mutual Fund Capital Gains Can Eat Retirement Savings
Mutual funds often have capital gains that new fund investors unknowingly buy into. These are often taxable gains, even though the investor may have not actually gotten the gain.
This seems crazy but it’s true.
Simply checking to see if any existing capital gain exists before buying into any mutual fund, and avoiding the fund if taxes will be due on that existing gain, can end this hidden investment mistake.
Invest in Less Expensive Funds
Most financial firms have several versions of the same fund. Some were created for wealth managers and others were created for individual (retail) investors.
Investors can unknowingly be in a more expensive fund that gets the same returns as the cheaper fund. Checking to make sure your retirement savings are in the least expensive fund class will leave you with more money.
Making Money with Cash
In brokerage accounts, investors can have money in cash that earns little or no interest while money market accounts exist with comparable risk but pay higher interest.
Making another 1 or 2% investment return can have a significant in the compounding of your retirement savings over time.
Saving money for investing often gets put as a last priority because it is in the “Important but Not Urgent” category. A great solution is to create a consistent routine of depositing money into retirement savings.
Spend Time on Investing
It’s been said to look at your planner to see what matters most to you because that is where your time is spent.The only thing I don’t think this applies to is building and managing wealth.
Scheduling time for wealth creation on a specific day of the week or month solves this easy to fall into investing error.
Click on my eBook below to get it now. It has the traditional and alternative investment strategies we used. Plus, it’s free.
Seeking and Trusting Unbiased Advice
There are millions of opinions about the best way to invest at any given time, usually given by someone with an agenda.
Understanding investing, seeking unbiased information and accepting complete responsibility for investing (whether or not a financial advisor is employed) will all assist your catch up retirement savings effort.
Not All Debt Is Bad
Debt is a tool that can help investors accomplish things they otherwise couldn’t accomplish.
Being aware of the huge difference between high credit card debt used for depreciating assets and lifestyle expenses vs debt used strategically and cautiously for leverage can help investors make smarter decisions about debt.
Structure is comforting but it can also be limiting. Being rigidly committed to a certain investing strategy, such as a standard asset allocation into stocks and bonds, limits options.
Being able to think outside of the box is the best solution. For investors playing catch up on retirement savings, alternative thinking becomes even more important.
It is worth repeating that what got you where you are now probably won’t get you somewhere else when it comes to catching up retirement savings. Welcome a new way of thinking.
Trusting Someone Else’s Rules
Trusted financial expert Dave Ramsey says that all debt is bad because he became over leveraged in real estate before a change in the real estate cycle. This was his experience.
Dave Ramsey also says you can expect to earn 12% from a year from stock investing yet from in the decade from January 2000 to through December 31, 2009 the S&P 500 had an annualized return of -3.75% without dividends and adjusted for inflation, two important factors for someone living off investments. (1.) (2.)
Sure, the market came back strongly the next decade but this data demonstrates that the return you get from an investment can vary greatly from decade to decade. Ten years is a long time, especially when going from age 50 to 60, or age 55 to 65 as time shortens for catching up retirement savings.
♦ Wealth Building Tip – Learn about investing then make your own rules based on your age, net worth and situation.Learn about investing then make your own rules based on your age, net worth and situation. #investor #retirecertain Click To Tweet
Accepting the Unknown
Depending on unknown investing and economic factors just to be able to pay monthly bills every month can be scary. The reality is that no one knows for sure how much stocks or bonds will return in the future.
By using probabilities, however, and factoring in valuations investors can increase the reliability of their retirement planning. There is also a lot less uncertainty when planning for retirement at age 55 vs age 35 making late retirement planning more accurate.
Also, creating diversified income sources gives investors more control over their income and financial future.
Retirement Planning Calculators Are Limited
Knowing that you are planning your financial future on only best guesses, Plan B and diversified income sources can be absolute life savers when retirement planning estimates were incorrect.
Confirmation bias leads investors to see what they want to see instead of seeing more reliable numbers. Using reliable data to make logical decisions is the best solution to avoid this common occurrence in retirement planning.
Long Term Stock Appreciation Tendency
In my 30’s I kept a Value Line stock chart plotting decades of stock appreciation so I could remember that stocks move up, overall, more than they move down, over the long term.
Despite the ups and downs, stocks do appreciate in value over long periods of time. This means that money put into stocks at age 50 can potentially have 20 years to appreciate and compound by the time an investor hits 70 especially when invested at low valuations.
It’s worth repeating that, despite the potential for investment compounding, it’s important for investors to check valuations before buying any investment.
One of the biggest investment mistakes is limited thinking. In general, almost everyone lacks a “can do” attitude. This is because our brains are naturally wired for fear in order to survive.
Not only this, but we are bombarded with negative messages in the media along with an overall message that investors can’t build wealth alone.
There are many ways to catch up retirement savings beyond long term investing in stocks and bonds. Fortunately, the millennial’s are experiencing this with the FIRE movement (Financial Independence Retire Early) but I rarely see it except for online and in my community of financial bloggers.
Healing Subconscious Money Beliefs
At the core of every investment decision are subconscious beliefs. Even traditional mainstream finance has begun recognizing this paradigm and given it a complex name, “behavioral finance”.
Look at your earliest beliefs about money and past money mistakes to recognize and remedy old beliefs around wealth creation.
Playing Catch Up in Retirement Savings Summary
If you’re playing catch up with retirement savings, realize you’re among the vast majority of people over 50. Realize that every investor makes investment mistakes, even Warren Buffett. Use any investment mistakes you may have made to become a better leader of your wealth.
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Disclaimer: This post is for educational purposes only and not meant to be taken in any way as personal financial advice. Do your own research before investing in anything, ever.