When You Reach This Age, Retirement Outcomes Become Harder To Change

For many, retirement can feel like a far-away goal that may one day be a reality. While the long time horizon can motivate some to continuously save and invest, it may convince others that retirement preparation is something they can just keep putting off. However, after a certain age, retirement savings can no longer be ignored without severe consequences.

The decade between the ages of 45 and 54 is often reported to be when workers hit their peak annual earnings, which would suggest that this season of life might be the easiest time to set money aside for retirement. However, at this age, the heads of many households face pressures like raising children and funding the many huge out-of-pocket expenses that come with a college education. At the same time, working-aged adults may also be caring for their own parents as they age, which can come with its own expenses and take up valuable time. Those in the 45-to-54 age range are often considered part of the so-called sandwich generation that deals with these competing responsibilities. Meanwhile, they're still too young to benefit financially from programs like Social Security or Medicare, forcing them to cover many day-to-day expenses with little aid or supplemental income.

According to a study from Allianz Life Insurance Company, around 59% of adults in the sandwich generation have slowed or stopped their retirement contributions. Unfortunately, the closer to retirement someone gets, the harder it will be for them to catch up on any retirement contributions they missed.

While the sandwich generation can include people both younger than 45 and over 54, people in that range may find it especially hard to change their retirement outcome. At this age, time is no longer a luxury. While 30-year-olds still have several decades to save money and let it grow in the market, those in their 50s have less time to let compounding work in their favor or make up for previous years' missed retirement contributions. Catch-up contributions are an underrated way for people over 50 to boost their savings, but many people in their 50s have other financial responsibilities that could make setting extra money aside for retirement even harder.

For example, AARP reports that 68% of people over 50 claim debt interferes with their ability to grow their retirement funds. Americans often carry credit card debt into retirement, giving the interest more time to grow and further complicating their golden years. Additionally, people start having kids in their late 20s on average, which means they're likely to have college-aged kids by the time they're in their mid-40s. As tuition prices continue to rise, parents may need to shift their finances away from paying off existing debt — and possibly take on even more — to pay for their kids' education. Meanwhile, the need for housing, transportation, food, and healthcare doesn't go away as you get older. So, middle-aged adults need to continue accounting for those expenses as other forces stretch their budgets thinner and thinner.