Retirement is a significant milestone in life. You may have spent all your adult life preparing for it, putting away your hard-earned money in savings, investing in instruments that align with your goals, and trying to maximize your tax benefits. However, as you enter your 50s, things get all the more serious and pronounced. With just a few years left, retirement is no longer a distant dream but a tangible reality on the horizon. Your 50s can be a crucial time to ensure the retirement you always dreamed of can come to fruition. It is essential to use this period wisely and make strategic moves to ensure a smooth transition into retirement.
A financial advisor can help you prepare for a fulfilling and financially secure future. This article will explore 40 practical things you can do at this stage and how to prepare for retirement in your 50s to help you navigate this pivotal stage in your life.Â
How to save for retirement at age 50
Retirement planning at the age of 50 can be tricky if you are lagging in your goals and targets. However, you also have many advantages at this age. You are likely to be earning more than you did before. This can offer you an edge and room to save and invest more. Retirement accounts like the 401(k) provide catch-up contributions that can help you bridge the gap in your savings and investments, allowing you to accumulate more funds for your non-working years.
There are also some disadvantages to starting retirement planning at 50. With little time left to retire, you may not be able to take advantage of compounding benefits. The more time your money gets in the market, the more it can compound and earn higher yields. At the age of 50, you do not get this benefit. Additionally, your risk appetite may also drop at this stage. You may not be able to depend on high-yield options, like stocks, as they come with higher risks. Instead, you may have to rely on low-risk instruments like bonds, certificates of deposit, money market accounts, etc., which offer a relatively lower yield.
Nevertheless, you can still make up for it by employing some carefully constructed measures and strategies.
Here are 40 things to do before you turn 50:
1. Assess your retirement savings
One of the first steps you can take, no matter your age, is to assess your retirement savings. Knowing where you stand can allow you to stay on top of your game and decide your future. Start by evaluating your savings, such as emergency funds, savings accounts, money market accounts, etc. Remember also to look at your financial assets, such as real estate, gold, collectibles, etc. You must also consider your investments, such as 401(k)s, Individual Retirement Accounts (IRAs), mutual funds, stocks, etc., to understand your current financial standing. Based on this, you can understand how much more you need to save for your desired retirement goal.
2. Estimate your retirement expenses
The next step is to evaluate your retirement expenses. Look at your current lifestyle and spending patterns. Your expenses, such as groceries, gas, electricity, etc., will follow you in retirement, too. In addition to this, you may also have newer expenses like healthcare, long-term care, etc.
3. Fix an age at which you hope to retire
Fixing a retirement age helps you streamline your retirement planning strategies and avoid unnecessary delays or turns in your journey. Be clear about when you wish to retire, and create a retirement plan around the timeline you set for yourself.
4. Pay off your debt
Debt is one of the things that can impact you the most in your 50s. Carrying debt into your retirement can be detrimental to your financial health. Ensure to eliminate all loans, mortgage payments, and mounting credit card dues as soon as possible. Prioritize settling high-interest debt first, consider consolidating your debt, and avoid accumulating more debt at this phase of life.
5. Create a budget
Creating a budget is essential to ensure that you never go overboard and can keep your expenses in check. A budget can help you save consistently, live sensibly, and eliminate the need to spend more than your means.
6. Automate your savings
Automating your savings ensures you do not miss out on prioritizing your future for the sake of your present. It allows you to be disciplined and not falter along the way.
7. Review your investment strategies
It is important to review your investment strategies from time to time to ensure they align with your goals. As you grow older, your goals may change, your liabilities may differ, inflation can impact your savings, your risk appetite can drop, etc. Ensure that your investments are in tune with your financial needs at all times.
8. Consider catch-up contributions
Catch-up contributions are one of the most significant financial benefits of turning 50. Retirement accounts like 401(k)s, IRAs, and others allow you to contribute more yearly if you are 50 or older. For 2023, you can contribute up to $7,500 on top of $22,500 to a 401(k) and $1,000 on top of $6,500 to an IRA.Â
9. Contribute more to your 401(k)
If you are wondering how to retire at 50 with 401k, the answer may be matching contributions. Employer matches on your 401(k) contributions can help you significantly increase your retirement corpus. Make sure you take advantage of this by contributing more.
10. Consider investing in an IRA
You can contribute to an IRA if you do not have a company-sponsored 401(k). An IRA can be one of the best ways to invest for retirement at age 50. It offers similar tax benefits and provides financial security in retirement.
11. Get your older accounts in order
If you have switched jobs in the past or plan to do so now, make sure you transfer funds from your old 401(k)s to the new employer account. It is common to forget about your old accounts, but this can be detrimental to your retirement financial security.
12. Avoid early withdrawals
Early withdrawals can lead to penalties and taxes. In addition, they can also hamper your progress. It is advised to avoid them unless necessary.
13. Create an emergency fund
An emergency fund can be your savior in diverse situations. You must always have at least three to six months of your expenses saved up in an emergency fund.
14. Create or update your will
Estate planning is a big component of retirement planning. As you grow older, it is vital to ensure that your estate planning documents, such as your will, trusts, health directives, powers of attorney, etc., are in place and as per your wishes.
15. Designate beneficiaries for your accounts
Make sure that designated beneficiaries are updated on all your accounts. It is also important to note that your beneficiaries match your accounts and your will to avoid any mishaps and hassles for your family later.
16. Avoid checking your portfolio too often
Checking your portfolio too often can lead to panic decisions and emotional investing. It is advised to rebalance your portfolio only at major milestones like an increment or periodically once or twice a year, depending on your changing goals.
17. Review your life insurance coverage
Life insurance is a great estate planning tool. Ensure you have sufficient coverage to protect your loved ones in your absence.
18. Plan for charitable giving to lower taxes
Donating money to charity can help you lower your tax bill. This can be a great strategy if you are in the high-net-worth category. You can consult a wealth manager or financial advisor to explore this option.
19. Understand your Social Security benefits
Social Security may not be sufficient to cover all your retirement needs, but it can be a great addition to your retirement nest egg. Understand your benefits and account for them in your retirement planning to efficiently plan your other retirement income sources.
20. Delay Social Security benefits
Delaying your Social Security can offer you higher benefits. You can increase your benefits by up to 132% if you claim them at the age of 70 or later. This can help you in the later stages of retirement.
21. Do not ignore inflation
Inflation can be detrimental to your retirement savings. It can erode the purchasing power of your money. Therefore, it is crucial to invest in instruments that offer inflation-beating returns. Depending on your risk appetite and goals, you can explore options like stocks, real estate, etc.
22. Evaluate your health needs
Your health needs will likely increase in retirement. Therefore, saving a chunk of your savings for medical expenses is vital. Keep medical inflation in mind and assess your healthcare needs to plan effectively.
23. Plan for long-term care
Apart from primary healthcare needs like medicines, surgeries, health check-ups, etc., you may also have to plan for long-term care needs, such as assisted living, nursing homes, etc. This can be a significant but unavoidable expense in your older years. Long-term care insurance can help you cover these costs without depending on your children or other relatives.
24. Create a distribution strategy
While you may divert all your time into saving for retirement, it is also essential to plan how you use your savings. A distribution strategy can help you plan when and how much you should withdraw from your retirement fund not to outlive your savings.
25. Plan well for taxes
Taxes can erode your savings. However, strategies like using a Roth account, donating money to charity, using lifetime gift exemptions, etc., can help you lower income, estate, and inheritance taxes.
26. Evaluate your family obligations
Pay attention to your financial obligations towards your family, such as paying for your children’s college education, covering medical bills for a dependent, and others. Plan for these separately so they do not interfere with your retirement needs. Â
27. Downsize your lifestyle
Downsizing can help you reduce your expenses in retirement and before that. If you need to save more, consider moving to a smaller home, getting rid of additional cars, opting for frugal living, etc.
28. Identify expenses you can eliminateÂ
Your 50s can be a critical time as you have a few years left to plan for your retirement. Try to identify expenses that you can eliminate to maximize your savings. For instance, you can reduce your spending on travel, entertainment, socializing, eating out, etc.
29. Get a part-time job
Getting a part-time job can help you earn more and bridge the gap in your savings and goals. You can work part-time in addition to your other job and save more before you retire. You can also work part-time post-retirement to lower the burden on your savings.
30. Delay your retirement if necessary
If you are 50 and have no retirement savings, you may have to consider delaying your retirement. This may be necessary to ensure you get more time to save and prepare for your non-working years. However, keep your health status in mind when making this decision.
31. Keep your retirement goals separate from your children’s needs
Your retirement goals should be separate from your children’s financial needs. It is essential to draw a line when needed. While your children have their whole lives ahead of them and plenty of opportunities to make money, you may not have the same luxury at your age.
32. Lower your portfolio’s risk gradually
Your ability to take on investment risk will lower as you move closer to retirement. Talk to a financial advisor to learn how to gradually reduce your portfolio’s risk to align with your risk appetite.
33. Understand MedicareÂ
Medicare can help you cover your essential health expenses. You can start Medicare at the age of 65. Go through your plan and understand how it works and how it can help you in your hour of need.
34. Maintain a good network
Networking in your 50s can be crucial. Your professional network can help you find better earning possibilities, get jobs that offer additional benefits, and more. A good network can also help you get back to work if needed after retirement.
35. Be rational
Retirement can be a difficult transition. It can take time to settle into a new life. You may find it hard to adopt a new routine. However, being rational can help you ease into retirement both mentally and financially.
36. Consider finding a hobby
You can find a hobby that can help you stay agile, motivated, and happy. A hobby can be turned into a financial endeavor. It can help you stay engaged and present the opportunity to socialize with people with similar interests.
37. Make fitness a priorityÂ
Being fit can help you keep your health in check. It can lower your stress and medical expenses and make retirement all the more fun and exciting.
38. Be emotionally prepared
It is essential to prepare yourself for the life ahead. Retirement will be different from your working life, and you may need to find new ways to utilize all the free time you have on your hand. The better prepared you are, the more comfortable you will be in the new phase of your life.
39. Plan trips
Travel can be an excellent way to connect with yourself, explore the world, and keep busy in retirement. It can also present the opportunity to meet new people and network.
40. Consult with a financial advisor
If you are concerned about how to start a retirement fund at 50 or strengthen your existing retirement plan, you can hire a financial advisor. Talking to a professional can help you avoid mistakes and adopt a comprehensive path to financial security for life.
To conclude
It is not too late to start investing as long as you follow the right approach. By following the 40 steps mentioned above, you can set yourself up for a secure and fulfilling retirement. Use your 50s to evaluate your financial readiness, make necessary adjustments to your plan, and prepare for what lies ahead. However, remember that everyone’s journey is different, and it is important to customize these tips based on your requirements.
Use the free advisor match service to search for a financial advisor who can help you plan. If you answer a few simple questions about your financial needs, our matching tool can connect you with 1-3 advisors that are best suited to meet your financial requirements.Â
For additional information on how you can implement retirement planning strategies tailored to your financial requirements, visit Dash Investments or email me directly at dash@dashinvestments.com.
Sincerely,
Jonathan Dash
Founder and President
Email:Â info@dashinvestments.com