If you have children, you know the “tween” years—those middle years between child and teenager—and the challenges (and eye-rolling) that seem to define the period.
If your career had an analogous time period, it would be your 50s. Fifty-somethings often find themselves done with those prime parenting years but not quite moving into retirement.
Planning to retire at 60? Or maybe you love your work so much that you plan to work until 70 or beyond? No matter your time horizon, when you’re in your 50s, there are critical money moves to make now to keep your retirement on track. Here’s a look at six moves you can consider now.
And, please, no eye-rolling. Seriously.
Get a Handle on Your Budget
Although budgets are no fun, they are an essential factor in this process. "I hate to say it, but the first and most important step in the retirement planning process is establishing your budget," says Ann Minnium, certified financial planner and founder of Concierge Financial Planning in Scotch Plains, New Jersey.
It’s not as daunting a task as it sounds. Start by determining your current annual or average monthly expenses, Minnium says. "There are online tools that can help. Once you have your current budget, set up a future budget that’s just your current budget minus any expenses you won’t have in retirement, such as childcare, kids’ school expenses, and commuting. If you’re planning to move, estimate your future expenses in your new location. If you can’t, go with your current expenses for now."
Now’s the Time for Power Saving
The 50s are may be the time to ramp up your retirement savings. "As soon as the kids have moved on, start spending on yourself by socking it away for retirement. It will be here before you know it. Don’t forget that once you hit age 50, you can make catch-up contributions to 401(k)s, IRAs, and HSAs."
Plan to Retire with No Debt
Interest rates are temptingly low for borrowing, but force yourself to pay down your mortgage, Minnium says. "You may need to access that home equity during retirement, and if you still have a mortgage, you won’t be able to. What’s more, inflation might eat away at your purchasing power, so that fixed monthly payment will feel like it’s going up every year, leaving you less to spend on other things."
Consider Tweaking Your Stock/Bond Allocation
As people age, asset allocation becomes more important. "People in their 50s should be sure that they have established an appropriate asset allocation and then stick to it, rebalancing as needed. As retirement draws near, it’s prudent to reduce the risk in your portfolio and invest more conservatively. This is due to sequence of returns risk, which is greatest a few years before retirement until about 10 years after retirement," Minnium says.
Recognize Your Nest Egg May Need to Last 30 Years
"Forget the old retirement myths you’ve heard; 4% is likely too high a withdrawal rate in today's environment. Even $1,000,000 ain't what it used to be, and may not be enough to retire. There is absolutely no reason that you are entitled to retire by 65. If you are not financially ready, plan to keep going. Many retirees miss their work," Minnium says.
Staying Healthy Should Be a Top Priority
"If you feel you can’t save another penny, then think of exercise as a way to save. By exercising and staying fit, you will reduce your medical expenses during retirement. In fact, many people can 'save' more by exercising than they can by maximizing their 401(k)s! Don’t get too excited, though—you need to do both. A couple in their 50s can expect to pay $370,000 or more for health care during retirement. It’s possible to cut that number in half by staying in shape," Minnium says.
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