What to consider when planning for retirement in your 50s.
SERVING THE ST. LOUIS REGION
Entering your 50s and inching closer to retirement, it’s natural to wonder if your finances are where they should be at this stage of your life. At 50, many adults have a growing sense of self, an established career, and increasingly independent children, which presents many opportunities for growing your savings.
However, many in their 50s still feel behind the curve and wonder if their money will last them and provide them with the lifestyle they want in retirement.
Whether you have an investment portfolio that’s managed by a professional or you’re still hesitating on hiring a financial advisor, it’s never too late to start thinking about establishing a long-term plan to satisfy your retirement goals.
Taking into account your income, expenses, spending limits, and saving goals are vital parts of developing a long-term financial plan. Once you identify your necessary spending, you’ll need to look at where else you’re money is going before you can see what’s left over. For example, tracking your incoming and outgoing expenses with a budget worksheet can provide a detailed description of what money is coming in, and what’s going out – good or bad.
Next, you’ll need to establish your future financial goals and adjust your budget to live within those means. Paying close attention to these details now will help you determine the type of lifestyle you’ll want to have later and adjust to living within those means.
Debt is easy to accumulate, difficult to pay off, and those pesky interest rates create expensive roadblocks to your future.
At this stage, your primary goal should be prioritizing your debt based off of the highest interest rate and eliminating those first. This provides an opportunity to redirect your funds to your other financial goals faster. Typically this starts with credit cards, then car debt, and lastly your mortgage. Paying these off early will allow you to work towards manageable investments with long-term benefits.
In the early stages, it’s important to remember that a minimum goal is better than no goal at all. Ideally by age 50 you have set up a 401(k) plan and have been contributing the maximum amount.
A general rule is that by age 50, you should have at least five times your yearly salary saved. If you make $80,000 per year, you should have $400,000 across all of your retirement accounts and bank accounts.
If you’re 50 and older you can make catch-up contributions to your 401(k). In 2023 the 401(k) contribution limit is $22,500 for those under 50, but it’s $30,000 if you’re over 50. Max out these limits or get as close as possible, especially if you’re behind on retirement savings.
The adage “Love what you do, and you’ll never work a day in your life” rings true for many who’ve experienced it firsthand.
Approaching retirement, the advantages of a seasoned career become evident. With each passing year, accumulated experience brings raises and bolstered savings. Longevity at a company unlocks additional benefits, while Social Security benefits grow over time. Established earnings can offset past financial fluctuations.
Some retirees enjoy their careers and opt to work into retirement but with less hours. Having a job you love does make a difference!
Since healthcare is one of the most significant expenses for retirees, it’s essential to familiarize yourself with the best options to ensure comprehensive coverage throughout your golden years. And since people are living longer than ever before, it’s vital to plan for longevity by assessing your health and family history to estimate your life expectancy as accurately as possible.
While Medicare is reassuring, it doesn’t cover everything (including long-term care costs), so it’s best to plan on reserving some of your retirement savings for healthcare costs.
For many people, the best option is to wait until your full retirement age or 67 (or beyond) to redeem your Social Security benefit. Though you can claim as early as 62, you will be penalized by receiving a reduced benefit, ultimately costing you and your spouse more long-term. If you wait until you’re 70, you could substantially increase the payment you receive for the rest of your life. After 70, there is no incentive to hold off longer. Of course, this type of decision is highly individualized.
If your assets span various financial institutions, consolidate them into one account with low management fees for a streamlined retirement income strategy.
If you’re just starting now, take a conservative approach with medium risk to ensure growth and security. Once your assets are combined, diversify investments to maximize returns, reduce volatility, and minimize drawdowns in uncertain markets.
Partner with a trusted independent fee-only retirement advisor for guidance, reassurance, and goal setting throughout this phase.
In your 50s and 60s, significant family obligations may arise. Whether it’s supporting aging parents or assisting children through life events like college or weddings, these unexpected financial obligations can add up.
Financial advisors anticipate future needs and craft comprehensive retirement plans. At Toberman Becker, we look at budgeting, insurance, investments, and emergency funds to reach financial stability in retirement. We also assess liquidity in case our clients need to convert investments into usable funds for unforeseen expenses.
At Toberman Becker, we recognize the importance of planning for retirement and the urgency if you haven’t started yet.
Whether you’re just starting or have been investing for years, it’s never too late to start chipping away at your future goals. Book a call below with St. Louis fee-only financial advisor Michael Becker to see how these five steps can lead to a new perspective and a confident future.
“Successful investing during retirement means targeting a smooth ride, and minimizing your chances of ever having to worry about money.”
MICHAEL BECKER, PARTNER
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