Age 50 is a major milestone. Not only does it mean you’ve lived for half a century, but it also comes with some key advantages that can ensure you are saving enough for retirement.
“As your retirement inches closer, you must continually take stock of where you’re at and what you can do differently to reach where you want to be,” said Senior Wealth Management Group Officer David McAlpine. “At age 50, there are many things you can do to maximize your savings and ensure you can do what you want when you stop working.”
6 steps for managing your finances as retirement creeps closer
If you want to retire at 65, you only have 15 years left at age 50 to make sure you have enough money saved to accomplish your goals. That may not seem like a long time, especially if you’ve been working for the last 25-30 years. However, there is still time to ensure you will have what you need. Following are six steps to help you determine if your retirement plan is on the right track.
- Eliminate debt — By age 50, you should at least have a plan to eliminate some of your largest debts (ex. student loans and mortgages) prior to retirement. Starting retirement with large amounts of unpaid debts means you will have to rely on the savings and investments you have accumulated to not only live off of, but also to pay back outstanding loans. Look at your remaining debts and prioritize paying them off quickly so you can contribute more to your savings.
- Start planning what you want to do in retirement — What you want to do after you retire will determine how much money you need to save before you can do so. Start examining what your plans will include and if the amount you’re saving will allow you to achieve that goal.
- Learn more about Social Security — How long you have worked and how much you have paid in Social Security taxes will determine your benefit, which you can start to collect at age 62. When you turn 50, you may want to create an account at ssa.gov so you can get a better idea of how much you will be able to collect and how your other savings will impact your Social Security. If you are married, you will want to explore the options available to both you and your spouse to determine the best social security claiming option for you.
- Pad your retirement savings — At age 50, experts suggest you should have about five to six times your annual salary saved up in retirement accounts. If you are behind in your savings, you are allowed to make catch-up contributions. With a 401(k), you can contribute an additional $7,500 per year for a maximum of $30,500 each year once you reach age 50 (2024 tax year). You can also contribute an extra $1,000 to a traditional or Roth IRA for a maximum of $8,000 in one year (2024 tax year). Calculate how much more you can contribute to ensure you will have enough to retire.
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Update your estate plan — Age milestones are a great time to review your estate plan and make necessary adjustments. Along with a last will and testament, your estate plan should include a financial power of attorney, health care power of attorney and a living will. You should also review beneficiary designations on life insurance, retirement plans and other investments. You may also want to consult with an attorney to discuss whether establishing a trust would be beneficial given your situation and goals and objectives.
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Meet with a financial adviser — Have a professional review your finances and provide an unbiased opinion. A financial adviser can help you gauge whether your savings are on track and help you set a tentative retirement date, so you can rest assured that you will be able to do what you want when you do retire.
More information
Contact Peoples Bank Wealth Management Group to learn more about reviewing your finances after 50 to ensure your retirement plans aren’t out of reach.
Tips provided by Iowa Bankers Association.