After years of working for your hard-earned money, retirement is typically the bright light at the end of the tunnel. If you were able to begin your retirement planning and savings at an early age, you might be ready to retire now. However, not everyone is fortunate enough to start early. There are many reasons you may not have been able to start early. Regardless, here is how to plan for retirement in your 50s:
Planning For Retirement In Your 50s
#1 – Set achievable goals
Ask yourself a few questions:
- When do you want to retire?
- Do you know how much income you will need?
- Do you have a budget of expenses?
- How much do you have saved now, and how much can you save each month?
There are times that you will encounter issues associated with retirement: sudden significant expenses or a major change in your life that can affect your future plans. However, if you set realistic and achievable goals, you can be sure that you will have enough money to retire when you plan. These goals will serve as your inspiration which in turn can help you to plan your retirement successfully. Our How To Plan guide will help with questions you should ask yourself to begin planning.
#2 – Where do I invest? A 401k, 403b, a taxed account? IRA or Roth IRA?
Where to save your money for retirement differs greatly from when you are young versus when you are closer to retirement. Many professionals recommend a combination of tax-deferred and tax-free growth when you are able to save and invest for a longer period of time. When you are closer to your retirement age, using your available Roth options may be preferable. However, you should consult with a professional on your personal situation to make the right decisions.
#3 – Know your budget: income and expenses
Before you start saving or investing, it is important to know where you are today. What investments or savings do you have in place for retirement already? This may include social security income, pensions, planned inheritance, or retirement savings you started early on using 401ks, 403b, 457, or other plans.
Once you know what income you should have in retirement, outline your potential expenses in a budget. Starting with your housing (mortgage or rent, utilities), then food, medications and health insurance, cars and insurance, and other expenses. There are available budget tools that can help you plan. This budget will identify your expenses in retirement, which you can compare with your income. Any shortfalls will need to be planned for now so you can close that gap.
#4 – Max out your retirement options
In your 50s, you want to max out your available retirement options. This includes any employer-sponsored plans like a 401k, 403b, 457 or other plans as well as any IRA options. Fortunately, many people are at their peak earning years in their 50s and 60s, so your ability to save and contribute may be better.
These max contributions can change each year. In 2022, your max IRA contribution is higher than the typical max as you can make IRA catch up contributions if you are older than 50. For those younger than 50, the IRA max contribution is $6,000. For those older than 50, it is $7,000.
#5 – Consider your investment allocations and mix
When you are closer to retirement, your investment portfolio will have less tolerance for risk or losing money. If you were able to start saving early, your investment mix may have been more aggressive and have more risk associated. Now is the time to revisit any investments you may have had as well as any you will begin to make.
There are many tools available to assess your investment portfolio mix and align your portfolio to your goals. While these tools can be helpful, they may not take your personal circumstances into consideration. This is another reason why engaging a professional is so important.
#6 – Take action and start today
When it comes to planning, proper actions should be taken in order to save the most amount of money. If you want to make your retirement money work the hardest it can, you should take your goals and develop a plan to fund your retirement needs.
If you want to successfully plan your retirement in your 50s, saving money, setting goals, making contributions, and asking for the help of experts is the best decision for you. All of these things will help and assist you in achieving a wealthy and satisfying retirement.
#7 – Seek the help of professionals
Planning your retirement may not be easy for you, or can be overwhelming. There is a lot of planning that goes into it. However, if you seek the help of a professional, you will be guided through the process on how you can effectively plan. By hiring a financial advisor, you will better be able to plan for your future.
Want to know more about how we work? Here is how we select the best retirement investments for you. A professional will create a needs assessment, make sure you have a plan that has the right savings and investments to help achieve your goals, and walk with you during your journey in case any surprises arise.
At The Retirement Planning Group, our team is composed of not only retirement planning professionals but wealth managers, tax experts, investment managers, and more. Once we identify your goals and needs, we will help create a long-term retirement planning strategy for you.
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