As you are reaching the age when retirement is not far away, you may begin to feel a little stressed worrying if you have enough of a nest egg to retire without many issues. If up until now you have been diligent in putting money aside for retirement, you probably feel as if you are in good shape. However, if retirement saving has not been a priority, now that you are in your 50s there is no time to waste. In order to help you become more prepared for your retirement, check out the following steps you should begin taking right now.
1. Play Catch-up
If you are in the age bracket of 50 or older, you actually receive a bonus when it comes to saving for retirement. If you have reached the maximum annual contribution level on your IRA or 401(k), catch-up contributions will assist you in saving even more on an annual basis. Although the rules of catch-up contributions are subject to change, as of 2015, you are allowed to save an additional $6,000 in your employer’s plan and another $1,000 in your IRA. Therefore, taking advantage of catch-up contribution allowances while you are in your 50s, will allow you to save approximately $30,500 towards your future retirement.
This is a hypothetical example and is not representative of any specific situation. Your results will vary.
2. Rethink Your Portfolio
Although it is often advisable to invest some of your money in riskier investments, once you near retirement age, it might be a good idea to rethink your portfolio and also rebalance your investments. This is especially true if you have not saved much for retirement thus far. In order to begin expanding your retirement funds, it is advisable to shuffle your investments around and consider assets (such as bonds) which provide a little more security for your money.
3. Crunch the Numbers on Social Security
Social Security is often used as a supplement to a person’s savings. However, in order to have an idea of how Social Security will play into your financial wellbeing, it is important to calculate numbers in order to fully know how much you will actually receive. For example, if it is part of your plan to start drawing on Social Security at the age 62, the youngest age at which you can draw, it is important to know that the benefits you receive will be comparatively smaller. However, if you decide to wait until full retirement age before you begin withdrawing, you will receive 100% of your benefits. Additionally, if you are able to wait until sometime between the full retirement age and 70, you will also receive a bonus. Due to the differences in payouts depending on your age, it is important to carefully check the numbers before deciding a time at which to starting drawing Social Security.
4. Knock Out the Rest of Your Debt:
If you are still carrying around debts such as student loans or credit card debt, it might be a good idea to go ahead and eliminate those before you begin retirement. Getting rid of your debt will help you save additional money when you retire and eliminate many of the expenses you have been working into your budget for so many years. However, it is important to note that although getting rid of such debt is important, it should never hinder you from putting money aside for your retirement. While paying your debt off is good, your retirement fund is just as equally important.
5. Consider Long-Term Care Insurance
Long-term care is specifically designed to pay for some or all of your medical expenses should you need care such as nursing home care or home health aid. Medicaid can also help to pay for these expenses should they arise; however, you may end up spending most of your assets in order to qualify. If you have built up a solid retirement fund, then a long-term care policy will help you to get the most out of your money and ensure all the hard work you put into building a nest egg doesn’t go to waste. A good thing to keep in mind when considering long-term care is that the younger you are when you apply, the lower your payments will be.
6. Practice Living on a Post-Retirement Budget
A huge mistake people in their 50s often make concerning their retirement is not setting realistic goals for what they will need. After all, it can be quite a shock once you move away from a steady salary and start relying fully on your savings and Social Security benefits.
In order to assure this difference in income does not cause great difficulty, it is advisable to take specific steps before entering retirement. First, it is important to calculate your intended retirement expenses then plan a budget which helps you to pay your monthly expenses. Second, it is a good idea to take your budget through a trial run. Getting an idea of how your budget will actually work when you retire is a good way to catch issues before it is too late. If you see the monthly budget you have allotted will not be sufficient, you may need to look at places where expenses can be cut down or even consider ways to expand your income-earning years such as through worktirement.
Although you may be several years away from retiring, it is never too early to begin making preparations. Early planning and research will help to make the transition into retirement a little smoother. Additionally, in the realm of finances, having a specific plan for your money will help you to avoid many of the pitfalls which occur with who neglect to take the necessary precautions to assure their retirement goes as smoothly as possible.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. You should discuss your specific situation with the appropriate professional.