Your 50s are a pivotal decade. You are near enough to retirement to feel its hot breath on your neck, and that can be a good thing.
It sharpens your focus at a time when you may still have 10 or 15 years of work left, so there’s time to fatten your savings and watch the money grow.
If children finally are on their own, household expenses are lighter than they have been in decades. Rather than spend this freed-up money, sock away savings and pay off debt, which will bring you closer to the retirement you hoped for.
Following are some critical financial moves to make in your 50s.
1. Map out your strategy
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Spend a weekend gathering your financial information — savings, investments and other assets as well as your debts and bills. Then, map out your strategy for retirement.
Seeing all of the details of your finances and setting goals for your life beyond work will expose any gap between your plans and savings. It will also spur you to close that gap while you still can.
2. Meet with a fee-only financial planner
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This is a good moment to make sure you haven’t missed any crucial piece of planning. Even people who comfortably manage their own investments can profit from one or two meetings with a fee-only financial planner.
It’s important that the person you see charges an hourly fee with no commissions or products to sell, so he or she can objectively review your numbers, assumptions and plans. For more pointers, check out “3 Steps to Finding the Perfect Financial Adviser.”
3. Use retirement calculators — with caution
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Online retirement calculators are a good, if inexact, way to estimate the monthly or annual income you’ll receive from savings and other sources.
Two problems with calculators: They require you to make impossible guesses about the future rate of return on your investments, and sometimes they fail to accurately account for taxes.
Because of these issues, it’s a good idea to play around with several different calculators. One respected calculator is ESPlannerBASIC, a free tool created by Laurence Kotlikoff, an economics professor at Boston University and the president of Economic Security Planning Inc.
Other calculators include:
4. Supercharge savings
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If life’s demands have made it hard to save for retirement, your 50s offer a good chance to catch up.
Shoot for saving 20% of your income. If that’s too big a change, choose a lower percentage to start with and then increase it over time.
5. Maximize retirement plan contributions
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If your employer matches a portion of your workplace retirement plan contributions, take advantage of the free money — no matter your age. If your employer matches up to 3%, for example, save at least 3% to capture that gift.
Additionally, the Internal Revenue Service has special rules designed to encourage older savers to ramp up their savings for retirement. For example, savers age 50 and older may contribute an additional $6,000 to their 401(k) plan — or an extra $1,000 to an IRA — in 2019.
6. Decide whether to pay off your mortgage
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Money Talks News founder Stacy Johnson says that putting money in a tax-deferred retirement account often offers a better return than putting that money toward paying down a mortgage faster.
At the same time, you can’t discount the psychological value of owning your home free and clear in retirement. For a closer look at the pros and cons, read: “Ask Stacy: Should I Save More for Retirement or Pay Down My Mortgage?“