Saving for retirement is much like a race. As you approach your 50s, you hit the final stretch, which ultimately determines your level of success. The finish line is now in sight and retirement is a reality so close you can almost taste it. Even for couples who have planned well, there may be a shiver that travels down their spine as they ponder impending retirement. For those who have been less than purposeful in their planning, that shiver may turn into fear.
If you’re facing similar feelings of trepidation as you balance retirement planning with other responsibilities, here are some steps to follow to kick your retirement planning into high gear.
Know Where You Stand
A key part of retirement planning is knowing where you stand. This is even more important as you move through your 50s. Knowing where you stand helps you know better how to invest.
Much of this planning comes down to how much you currently have saved for retirement. At age 50, you should have at least six times your combined annual salary saved for retirement, according to Fidelity. Fidelity also recommends being at seven times your salary by age 55. Unfortunately, many are below this number as those between 50-55 have a mean savings of under $125,000.
Sit down as a couple and assess where you currently stand. Look at all active retirement accounts to see how much you have saved and determine what you need to do to hit your target. Don’t just set it and forget it, but revisit this on a regular basis.
Take Advantage of Opportunities
There are several opportunities to be aware of as you plan for retirement in your 50s. The IRS allows you to save more for retirement, which will help you make up for some, though not all, of lost time.
If you have access to a 401(k) plan, the IRS allows you to contribute up to $18,000 annually, as of 2017. When you reach 50, the IRS allows you to contribute a catch-up amount of another $6,000.
Similarly, you can contribute up to $5,500 in IRA plans. When you reach 50, the IRS allows you to contribute an additional $1,000 annually. Those may seem like small amounts, but it benefits you to take advantage of them.
Don’t overlook health care savings either, as you can contribute an additional $1,000 to a Health Savings Account at age 55, on top of the $6,750 contribution limit for families in 2017.
Pay Yourself First
Many couples in their 50s also have children starting, or attending, college. Helping children through college is a noble desire, but your retirement planning must come first – especially if you’re behind in saving. Otherwise, you put your retirement at risk.
“When one gets to retirement and hasn’t accumulated retirement savings, one only has the option of continuing to work or accepting a substandard lifestyle. The option to continuing working is often not available for health reasons (either the individual’s or to care for a loved one) or because an individual simply can’t find or maintain employment,” says Robert R. Johnson, PhD, CFA®, CAIA, President and CEO of The American College of Financial Services. Helping your children is great, but make sure to take advantage of all your opportunities first so as to not put your own needs at risk.
Assess Your Insurance Needs
Insurance plays an important role in your 50s as you ponder retirement planning. This doesn’t just include life insurance, but also disability insurance as well as long-term care insurance (LTC).
Disability insurance can help give peace of mind in case you or your spouse need to replace your income thanks to an injury. Additionally, you don’t know what your later years will bring and securing LTC insurance now may help you save money in the future.
Johnson recommends seeking help from a professional to piece these various parts together. “Establish a relationship with a reputable and qualified financial advisor,” he says. “That advisor will work with you to develop a financial plan to help you reach your financial goals.” Just make sure to work with someone you’re comfortable with that is on the same page as you when it comes to planning.
Take An Axe to Your Expenses
It’s likely you will have a lower income when you retire. Now is the time to analyze all of your expenses. You can do this by tracking your spending to see how you spend your money. The goal is to enter retirement with little to no debt, including your mortgage.
Don’t fall into the trap that you can downsize your house or cut back later. “The time to downsize is when you don’t need the extra space. Downsizing can reduce expenses in several ways — lower mortgage payments, taxes, less upkeep, etc. The money you save can be invested for retirement,” says Johnson. Cutting may seem painful at first, but by starting now, you increase your ability to save and improve your chances of approaching retirement with no debt and more control over what you can do in retirement.
Saving for retirement in your 50s can be a challenge, especially if you’ve done little to prepare prior. However, with the right mindset, you still have time to make significant progress.