Your fifties are an age where you could be in many different stages of life—you could be an empty nester, still have young children, or have recently started a new career. No matter what else is going on, one thing everyone in their fifties should be focusing on is retirement. If saving for retirement hasn’t previously been a priority, now is the time to make it one. Or, if you’ve established a decent-sized nest egg, you need to strategize so that you can make the most of that money. No matter which category you fall in, these five retirement savings tips for people in their 50’s can help you prepare.
If you’re looking for assistance in creating a personalized retirement savings plan, speak with a CERTIFIED FINANCIAL PLANNER™ professional at Good Life Financial Advisors of NOVA today!
Play Catch Up
Ideally, in your fifties, you’ll be close to the amount you plan to have saved for retirement. If you’re not, there are still plenty of opportunities to get yourself where you need to be. Most retirement savings accounts allow you to “catch up” by increasing your contribution limits.
An IRA with a normal contribution limit of $6,000 allows those over 50 to contribute an extra $1,000. For 401(k), 403(b), and 457 plans where the normal contribution limit is $19,000, those over 50 can contribute $25,000. Keep in mind though, if you have multiple employee-sponsored retirement plans, the contribution limit is for all accounts (not each individual account). If you are not employed, you may be able to use your spouse’s income to fund an IRA.
Reassess Your Asset Allocation
Your asset allocation is based largely on your time horizon. The longer the period of time you have until you plan to use your invested money, the more volatility you can typically handle. If you find yourself in the position of having a pension, like government employees, government contractors, or retired military, you will potentially be able to let your nest egg work harder for you, since you won’t be as reliant on it for income. This is something to think about as you consider the typical rules of thumb of investing.
Stocks are generally considered riskier and bonds are generally considered more conservative. When you’re younger, you can often handle a riskier portfolio with more stocks. As you grow closer to retiring, you’ll want to consider a more conservative portfolio. This means that you may want to increase the percentage of bonds in your portfolio and decrease the percentage of stocks. Especially in your fifties, you should re-evaluate your portfolio every three years to make sure your asset allocation is still appropriate.
Pay Off Debt
Ideally, prior to retiring, you will have paid off all debt. If you have no debt, you’ll have less fixed expenses and can be more flexible on the amount of income you’ll need. Not all debt is created equal, and your situation will largely determine whether or not you should pay off your mortgage. One thing is for sure, though—you don’t want to find yourself in a position where you’re “house rich and cash poor”. However, credit cards and other high interest loans are something that you really should not carry balances on as you go into retirement!
Your fifties are a great time to create a plan for paying off debt or utilizing strategic credit strategies to reduce the amount you pay in interest. More than likely, you’re still earning a paycheck during this time, so it is a great opportunity to start the debt snowball strategy if you haven’t already. If you’re an empty nester with an expensive mortgage, now may be the time to consider downsizing. This could allow you to minimize or even eliminate your mortgage.
Plan for Medical Expenses
One major area of retirement that you should plan for is medical expenses. Medical expenses in retirement can be incredibly costly, but there are things you can do now to help you prepare—one of which is considering long-term care (LTC) insurance.
Your fifties are an ideal time to consider how you will pay for a long term care need should you have one in the future. There are a lot of misconceptions about what long term care insurance is, what it covers, and how much it costs. Regardless, if you wait until you need long-term care services, it’ll be too late to purchase insurance. Another way to help cover potential medical expenses is to create or add to a Health Savings Account (HSA). HSAs reduce taxable income, grow your savings tax-free, and can be used to cover medical expenses. Having a plan for medical expenses is really important.
Plan Your Retirement Income
Another part of preparing for retirement is planning for your retirement income. One of the most complicated parts of retirement planning can be deciding when you’ll choose to take social security, and many factors play into what the best option for you is. It’s worth taking the time to make sure you’re making the right decision, otherwise, you may end up leaving money on the table. If you are married, it is even more important to consider the totality of your decision on when you claim Social Security benefits.
You’ll also want to consider other income sources you have. That could even include still working a certain amount. Many retirees find that working part-time or on specific projects is an enjoyable option that also brings in some extra income.
Find a Professional to Keep You Accountable
Once you hit 50, you no longer have the wiggle room and flexibility that you did in your earlier years. That’s why it’s important to take these five retirement savings tips for people in their 50’s into consideration. If you’re ready to take action on developing the retirement plan that you know you need to speak with a CERTIFIED FINANCIAL PLANNER™ professional from Good Life Financial Advisors of NOVA. Our team can help you create a plan tailored uniquely to your needs, and will act as a source of accountability to help you take action on the goals you’ve said are important to you. Reach out today!