Your 50s are a tremendously important decade for your financial health. Retirement is 10-20 years away, so the pressure is on to prepare, but you still have plenty of time to grow your savings. You’re also in your peak earning years, so the actions you take now can go a long way towards setting you up for long-term financial security.
Here are 5 steps everyone in their 50s should take to prepare for retirement.
- Have a comprehensive, up-to-date financial plan. Everyone should have a comprehensive plan for their money that is based on their unique circumstances and goals. Having a plan is even more important as you approach retirement age. If you need help building your plan, be sure to choose an unbiased financial planning service or financial adviser. Start by making a full assessment of your financial situation, including all your assets and debts. With a clear understanding of your financial picture, you’ll be able to identify and tackle your next steps.
- Identify gaps in your retirement game plan. Take advantage of the retirement calculator tools available online to estimate what your needs will be in retirement and assess how well your current assets will support you when the time comes. (A simple rule of thumb is that you will need to cover about 80% of your pre-retirement living expenses.) Knowing what the gaps are will help you address them more effectively.
- Lean into your savings goals. It’s never too late to save, and in your 50s, chances are, you’re at the peak of your earning power. Plus, your kids may be grown and out of the house, freeing up even more funds for you. Create and implement an accelerated savings plan to fatten your nest egg, pay off lingering debts, and address any gaps you identified in the previous step.
- Review your investments and shift your asset allocation as needed. Preparing for retirement means reviewing not just how much money you have saved, but how it’s invested. Take a close look at your investment/retirement portfolio and, as appropriate for your total circumstances, start shifting your asset allocation away from equities and more towards conservative, fixed income holdings.
- Make sure you have enough insurance. Safeguarding your financial health for the long term means expecting the unexpected. Review your home, health, life, and auto insurance policies to make sure you have enough coverage to protect your savings and your family in case of a medical or legal emergency.
Very helpful outline. Can you elaborate on life insurance? Is there a point where life insurance or how much life insurance should be relooked? As you say, in the 50s kids are often on their own. So should life insurance plans and amounts be revoked given this situation?
These are good tips! My SUM180 plan helped me analyze current contributions and what changes I need to make to be ready for retirement in a few years!