How to Start a Retirement Account at Age 50

The younger you are when you begin saving for retirement, the more time your money has to grow. But it's never to late to start putting away money for your later years. Once you turn 50, you can take advantage of additional tax breaks to build your retirement savings faster. By age 50, your children may be through school and you could be at your earning peak, making this the ideal time to start a retirement account

Formulate a plan. Determine how much you'll need to live on in retirement. Most experts say to plan on expenses equal to 70 to 90 percent of what you're spending now. Figure out how much you're likely to receive from Social Security and any pensions to which you're entitled. Compute the difference between your expected income and expenses to know how much you need to save. This will also help you see how much longer you need to keep working and saving before you retire.

Open your retirement account. Sign up for an employer plan if you're eligible. Open an IRA if you don't have an employer plan. If you're self-employed, open a SEP, SIMPLE or self-employed 401(k). Contact a financial institution to explore your options and determine which retirement plan is best for your situation.

Choose your investments. Discuss the amount you need to save, your projected retirement rate and how comfortable you are with risk with an independent financial adviser or a representative from the financial institution where you have your retirement account. Choose funds that balance your need for growth with your ability to recover from bad investments. The closer you are to retirement age, the less you can afford to risk.

Arrange for regular deposits into your retirement account through payroll deduction or automatic bank transfer. Automating the process makes it more likely you'll keep your savings commitment. Contribute as much as you can afford, up to and even beyond the maximum tax deductible donation.

Contribute the make-up amounts. The IRS allows people age 50 and over to contribute additional "make up" amounts to their retirement accounts each year. For instance, with a 401K, a SIMPLE or a SEP, you can contribute an additional $5,500 a year.