Help Available For Late Savers Says LSU AgCenter Family Economist

Jeanette A. Tucker  |  4/19/2005 10:28:30 PM

News You Can Use For November 2004

Do you wish that you could have saved more money for retirement when you were younger, but you didn’t? The good news is that it’s not too late to take action to achieve financial security in later life, according to LSU AgCenter family economics professor Dr. Jeanette Tucker.

"If you feel you are behind in preparing for retirement, don’t despair," Tucker says, noting, "You can still take action to make up for lost time."

The family economist reminds savers that the investment time horizon is the rest of your life, not your retirement date. This means, for example, if you are 45 years old today and live to age 90, you have 45 years to grow your money through the magic of compound interest. It is important, however, that your assets be invested aggressively enough to offset the effects of taxes and inflation. This means considering some stock or growth mutual funds in your investment mix.

Another piece of good news is that 2001 tax law changes provide increased opportunities for late savers to save for retirement. If you are 50 and older, you can contribute additional catch-up amounts to both an Individual Retirement Account (IRA) and an employer tax-deferred savings plan, such as 401(k), 403(b) or Section 457.

"These tax law changes are extremely valuable to late savers and may not last beyond 2010 if a ‘sunset’ provision in the tax law takes effect," Tucker says, adding, "Therefore, as they say in farming, it’s time to ‘make hay while the sun shines.’"

According to research by the investment firm T.Rowe Price, 50-year-old workers making the maximum contribution allowed each year to both an IRA and a tax-deferred plan, and earning an 8 percent average annual return, could amass $500,000 by age 65.

So, if you’re beating yourself up about what you haven’t done to prepare for retirement, Tucker says it’s time to stop and, instead, take action to create a bright future. Today is the first day of the rest of your financial life and it is time to make the most of it.

One reason catching up is so difficult is that compound interest is not retroactive. In other words, it is impossible to earn interest on money that was never saved years before. That’s the bad news.

The good news is that there are more than a dozen different ways for late savers to make up for lost time. All of these methods basically fall into one of two basic strategies:

• Take action before retirement to increase retirement savings.

• Take action after retirement to decrease the amount of savings required.

Like many decisions in life, catch-up retirement planning involves trade-offs. For example, you may have to spend less now to save more in a tax-deferred plan or delay your retirement to earn additional retirement benefits and/or save more money. The popular phrase "there’s no such thing as a free lunch" is an appropriate description of the catch-up retirement planning process, because all decisions have their costs.

Various retirement catch-up strategies can also be combined. Here are three options, for example: investing more in a 401(k) and moving to a less expensive location; moonlighting for additional income and delaying retirement; and investing more aggressively and "downsizing" to a smaller home.

The bottom line is that it’s not too late to get started. Catch-up savers who are just beginning to plan for the future still have many options. The Cooperative Extension System and the National Endowment for Financial Education (NEFE) have jointly produced the "Guidebook to Help Late Savers Prepare for Retirement." More than a dozen catch-up strategies are explained in this publication, along with tax law savings incentives and available resources.

This 52-page publication can be downloaded for free at  For additional information about the guidebook, call your local LSU AgCenter extension family resource management agent.

For information on related family and consumer topics in family, housing and nutrition, visit the FCS Web site at
Inst/Extension/Departments/fcs/.  For local information and educational programs, contact an extension agent in your parish LSU AgCenter office.


On the Internet: LSU AgCenter:
On the Internet: NEFE:
Source: Jeanette Tucker (225) 578-1425, or 

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