Financial Planning in Your 50s
Once you’ve reached your 50s, retirement is likely starting to materialize on the horizon. If you have children, they may be launched into the world, which creates more time for yourself, and your adult relationships can thrive again. While you’ve earned the right to be 50 and fabulous, it’s also time to start planning for not just your future retirement date, but what that retirement period in your life will look like.
Check Your Progress
Check in with your financial planner to complete a comprehensive review of your financial plan, portfolio, and goals. This can allow you to make any course corrections needed to ensure you will feel both the confidence and peace of mind needed to pull the trigger when retirement comes and it will give you a target retirement date to work towards.
Analyze Your Expenses
Start tracking both your essential and discretionary spending. If you don’t already have a process in place to do that, consider using one of the many apps available such as Mint, You Need a Budget, or Simplifi to make the process more palatable.
Having a good understanding of your expenses allows you to make informed decisions about your future. Would you like to retire earlier than is currently feasible? If you know where your money is going, you can easily review and cut out expenses that don’t serve your goals. This allows you to both increase your current savings rate and to reduce the living expenses you’ll need to support in retirement. Talk about a win-win! The less you need to depend on retirement savings to cover your living expenses in retirement after any social security, pension or other income, the more flexibility you’ll have when it comes to your retirement date.
Max Out Retirement Savings
Do you need to up the savings ante to reach your goals? Once you reach age 50, the IRS celebrates this milestone by allowing you to begin making catch-up contributions to many retirement accounts. For example, in 2023 someone over age 50 can contribute up to $30,000 to their 401(k) account; $22,500 in normal contribution, plus $7,500 in catch-up. Review the retirement accounts you are eligible to contribute to with your tax preparer and confirm you are maximizing your tax deferred savings opportunities.
Avoid New Debt
Adding debt and the resulting interest expense to your financial picture during this decade may set you back. After all, if you aren’t living within your means while you are working and earning an income, how will you do so once retired? Avoid cash-out refinances, car loans, and credit card debt, and instead opt to pay for vacations, home upgrades/repairs, new cars, and discretionary spending out-of-pocket. It creates good habits and avoids additional debt payments that might otherwise go toward increased savings for your long-term goals.
While this all may seem a bit daunting, I encourage you to look at financial planning as a slow, iterative process. Focus on accomplishing one step at a time and you’ll slowly build a stable financial house that will protect you and your loved ones from life’s storms for years to come.