Life in your 50s probably means a hectic work and family life, with multiple responsibilities. Retirement – perhaps 10 years down the road – may be the last thing on your mind. Still, it’s important to pause and reflect on this next stage before it sneaks up on you.
Granted, accumulating a retirement nest egg is key. However, sound planning calls for letting yourself dream about travel, volunteer work, a second career or things you’ve always wanted to do. It’s important to engage in envisioning exercised to prepare for your best life. There is a lot of free time, and boredom can be a big problem for some.
On the financial side, the secret for a fulfilling retirement is the ability to look at your behavior and develop good habits now. Ideally, you will eliminate the tendency to make poor decisions that may be hard to recover from. The goal is to maximize saving, investing and eliminating debts today so you can live the life you want in the future.
- Meet with an adviser, set a tentative retirement date. Create a written retirement plan. Doing so will give you the psychological boost – and you can use it to check your progress toward retirement. If you don’t have a written plan, an experienced financial advisor can help you prioritize your goals. An advisor will have objective, unbiased opinions and see things that you do not. You can even stress-test different scenarios that could happen before and during retirement.
- Learn about Social Security, consider other income streams. If you haven’t done so yet, set up an account at ssa.gov. You can use the calculators to estimate the amount of your monthly check when you retire. You will see a list of your earnings each year you have worked and paid Social Security taxes. Check these figures for accuracy, as they will determine your benefit. It also allows you to strategize on other income streams.
- Analyze your expenses, compare with projected income. Expenses such as housing, transportation and healthcare are necessary to meet your minimum needs; most others are discretionary. You need to understand your expenses to develop an investment and spending strategy.
- Check your progress, max out retirement savings. Many advisors will offer up this rule of thumb: 50-year-olds should have four to six times their annual salaries saved; 55-year-olds should have five to eight times their annual salary. This is a good starting point. However, it is best to crunch the numbers with a financial professional.
- Pay down debt aggressively, protect your emergency fund. To free up money to save for retirement, you may need to reduce your discretionary spending and pay down your credit card bills. In retirement, you want as little debt as possible. If you have an emergency fund, resist the temptation to use it for impulse purchases, as it can protect your investments and financial plan in a downturn.
- Think insurance, review all legal document. It is highly recommended that you review your life insurance and disability insurance to determine if both are sufficient for the last stretch of your work life. Also, be sure to include a plan for long-term care. Finally, it’s a good time to review and update your will or estate plan, financial and medical powers of attorney.
- Set boundaries with kids, consider your parents. Many people in their 50s are in a precarious position – proving care for both children as well as parents. The “sandwich” generation must establish expectations about their children’s financial responsibilities. By setting financial boundaries, you can avoid impairing your own retirement plan with your children’s financial needs. As for your parents, make sure they have an adequate aging plan in place to protect their assets – and your future.
If you haven’t created a financial plan or would like a second opinion on the one you currently have, we invite you to schedule a complimentary call with one of our financial advisors.