When you’re in your 50s, retirement is no longer a distant dream. Yet, there’s no need to panic when you’re planning for retirement at 50.
When it comes to saving for retirement, it doesn’t matter whether you have been a frugal spender during your working life or are just getting started.
When you’re in your 50s, it’s the most critical moment to review your long-term objectives and concentrate on planning. But, no worries. We’ve got your back. Keep on reading for our full breakdown of the essential strategies you can implement today to make the best out of your retirement.
The Basics of Planning for Retirement at 50: Stretch-Out Your Timeline
Here’s the thing.
Some retirees in their 60s are now living into their 90s. So, you’ll need to fill the next 30 years with important experiences and a lot of cash.
Don’t retire until you know what you want to do for the rest of your life and how you’ll be able to pay for it. Prepare a long-term retirement strategy now.
Set Attainable Objectives
The first thing to think about is how much money you’ve saved and invested so far.
With a little luck, you’ve been steadily depositing funds into various investment vehicles including 401(k) plans and Individual Retirement Accounts (IRAs).
How Much Is Too Little?
Your lifestyle and spending, as well as the amount of medical care you may need in the future, will play a role in how much you may expect to get from your pension plan and Social Security.
Make sure you don’t set the bar too low while reviewing your savings objectives. Get an estimate of how much money you’ll need to save for retirement by using a retirement calculator.
If you’re in need of some help, call in the pros. Take advantage of the free consultation offered by a fee-only financial adviser to make sure your plans are on track.
Reduce Debt as Much as Possible
Debt may be a stumbling block to saving for retirement. Your mortgage may be the last major debt obstacle you need to overcome by the time you’re 50 years old.
It used to be a wonderful way to celebrate the fact that you had paid off your mortgage and owned your house outright. It’s getting less and less prevalent, though. More than half of Americans between the ages of 60 and 70 have no mortgage when they retire, according to a Fannie Mae survey in 2017.
It is possible to save money or invest in the stock market without the burden of a mortgage. It may take some time to pay off your mortgage, but it’s worth it in the long run.
Take Advantage of Catch-up Contributions
It’s never too late to start saving for retirement if you haven’t done so before. As soon as you reach the age of 50, it is possible to make additional contributions to your tax-advantaged retirement plans (called catch-up contributions).
In 2021, younger employees will only be able to contribute $19,500 to their 401(k)s and $6,000 to their Individual Retirement Accounts.
In contrast, those over the age of 50 may contribute up to $26,000 to their company’s 401(k) and up to $7,000 to an Individual Retirement Account (IRA).
If you haven’t saved enough money for emergencies, you may have to draw into your retirement funds. Keep in mind that early withdrawals from your 401(k) or IRA can cost you. In most circumstances, you’ll be hit with a 10% penalty if you withdraw money early.
Initiate a Health Savings Account
Preparation for unanticipated medical expenses is another critical step to take. Expenditures for medical care may swiftly empty even the most diligent saver’s life’s work.
In retirement, a couple in their 60s will require $285,000 to cover medical expenses. Extended care in nursing homes comes with a hefty price, too.
It’s also possible to get long-term care insurance, which covers things like nursing and assisted living. A health savings account (HSA) may be an option for you if you meet the requirements.
To lower your taxable income, you should do this. When you reach the age of 65, you will be able to withdraw your savings without incurring any taxes or penalties.
First, you’ll want to look around for the greatest features, such as minimal fees or low minimum balance requirements, before making a decision.
And, if you’re concerned about taking care of aging parents, then you’ll want to encourage them to start putting money into their health savings account as early as possible.
Use Social Security to Its Fullest Potential
You may begin receiving Social Security benefits at the age of 62. As of age 50, it’s not a bad idea to think about how you’ll receive your benefits. Bankrate’s Social Security calculator will help you figure just how much you’ll get.
Most people, according to experts, begin collecting Social Security benefits too early. This is a blunder. You may make more money by delaying your retirement, but that’s not the only benefit. Because of this, it also impacts your monthly benefits.
At age 70, instead of 62, you may begin receiving Social Security benefits with an added 30% increase.
If you’re married and make more money, waiting to receive Social Security is a smart idea. You’ll be able to draw from a larger retirement fund if the higher-earning spouse delays claiming their benefits.
Generate Income and Invest
It is conceivable that your assets will provide you with a source of income in your later years. However, you should also consider alternative means of boosting your income outside of your stock portfolio and retirement funds, such as starting a side gig.
An extra source of income if you’re falling behind in your retirement savings might come from freelancing or consulting work. Also, it’s less hazardous than an annuity purchase.
Retirement Planning: Clear and Straightforward
You might have been putting aside the steps you need to take in order to plan for retirement for years on end. However, that doesn’t mean that it’s too late to add some logic and planning to your retirement preparations.
Hopefully, our guide has shed some light on how to start planning for retirement at 50. And, if you liked reading our article, then you’ll love checking out our other tips and tricks. All of those will be available in our finance section.