In your 40’s retirement seems far way. In your 50’s it begins to appear on the visible horizon.
When you ask people about retirement planning, most will tell you they wish they had started planning sooner. Despite the best of intentions many people do not get serious about their retirement planning until they reach their 50’s.
Retirement planning in your 50’s is the perfect time to take a thorough look at your future and how you can best plan for it. Lay out a road map using the steps below. Then take it one step at a time.
1. Run Projections Using Retirement Calculators
If you haven’t done any type of retirement projections start to play around with online calculators that help you figure out how much income you might have in retirement given your current amount of savings and investments.
Caution: Free online calculators give you a good broad overview of the relevant components of your retirement planning. They are based on assumptions. You know the old saying, garbage in, garbage out. Most online retirement calculator do not accurately account for taxes. This can make a big difference in the results. If you do not feel confident about the input required you may want to seek a competent retirement planner to assist.
If you’d prefer to do your calculations by hand try walking through the 4 Steps to Determine How Much to Retire.
2. Get a Handle on Spending
No one wants to hear it, but you can’t get around the truth. The fastest way to save more is to spend less. Building a lower cost lifestyle allows you to save more now, and it means you’ll need to have less saved to maintain your standard of living in retirement.
You can start getting a good handle on your spending habits by completing a retirement budget worksheet. Then check out 10 Ways to Save $10 a Day and 6 Ways to Buy Things for Less for specific savings tips.
Caution: If you plan on retiring before you reach Medicare age take a close look at estimated healthcare costs in retirement before you make any permanent plans. Healthcare costs can be far costlier than you might expect.
3. Educate Yourself
You are more likely to achieve your goals when you understand the choices available. You can read books, subscribe to finance magazines and attend classes to start learning about ways to invest in a smarter way and save more for retirement. You’ll also want to get a heads up on the rules about retirement accounts and how the rules change as you reach specific ages. You’ll find details in Retirement Planning by Age.
Caution: Online content, books and classes are all great resources, but it can still be difficult to determine which advice applies to your situation and which does not. Seek professional help from a retirement planner or specialist to double check your decisions.
4. Focus on Your Career
Finding work you enjoy might be the perfect solution. When you enjoy what you are doing, you’ll want to stay in the workforce longer. For most, your earning power is one of the biggest assets you have. Don’t be too quick to let this valuable asset go. If you’re not the career type look for ways you can earn extra money using hobbies and skills that you have.
Caution: If you are insistent on retiring in your 50's check out 3 Steps to Take to Plan for an Early Retirement.
5. Invest and Save, Don’t Speculate
You need to count on your retirement money to be there for you. Now is not the time to speculate. Learn what it means to build a portfolio - then build one that is appropriate for your goals. Start your education with 4 Things to Know About Investing for Retirement.
Caution: There is no such thing as a free lunch or a perfect investment. Nothing offers absolute safety with no risk. Even with safe investments you run the risk that your rate of return will be less than inflation and you will lose purchasing power over time. Your best option is to create a mix of investments with different levels of investment risk.
6. Review Regularly
The more often you look at your finances the more likely you are to make progress. Consider working your way through the retirement checklist. Once you’ve gotten all the way through the list, conduct an annual review by starting at the top and working your way back down the list updating things as you go.