Stepping Up Retirement Preparations: Crucial Financial Maneuvers to Consider in Your 50s
Your 50s can serve as a much-needed wake-up call: Retirement isn't a far-off concept anymore. With the clock ticking, the financial moves you make now can significantly shape the lifestyle you'll enjoy later in life.
Let's take a look at five expert-recommended actions to safeguard your financial future as you enter this crucial phase:
- Maximize Your Savings Consider your retirement contributions and catch-up options as "seeds for your future finances," says Mallon FitzPatrick, head of wealth planning at Robertson Stephens. If you're 50 or older, in 2025, you can contribute an extra $7,500 to a 401(k) beyond the $23,500 limit for everyone else. Once you reach 60 to 63, some plans allow an additional $11,250 contribution if your employer approves it.
FitzPatrick also suggests considering Roth conversions in periods of lower income because they provide a tax-free income stream in retirement. Collaborating with a financial planner to customize strategies to your income bracket and tax situation can be particularly beneficial if you're a high earner, a business owner, or an individual with complex deductions.
- Plan for Long-term Care Approximately 70% of people over 65 will require some form of long-term care, and Medicare won't usually cover it. Start planning in your 50s by evaluating hybrid insurance policies, self-insurance strategies, and the potential use of home equity. Hybrid policies, for instance, can combine health insurance with long-term care benefits, providing assistance if you need long-term care. Home equity conversion mortgages, the most common type of reverse mortgage, can help those aged 62 and older access funds for living expenses.
"Long-term care planning isn’t just an expense; it's the peace of mind needed to tackle future obstacles," FitzPatrick emphasizes. "It's not just about funding but also the model of care and who will manage it."
- Get Strategic About Social Security Timing "Claiming Social Security is like conducting a symphony of finances," FitzPatrick says. Delaying your claim increases monthly benefits significantly, while claiming early reduces the benefits.
Married couples can optimize their benefits by having the higher earner defer to boost both their own and the survivor's benefits. The Social Security Administration offers resources and calculators to help you plan. If you're still unsure about what's best for you, a breakeven analysis with a financial advisor can offer some clarity.
- Reassess Your Asset Allocation "Your 50s are the ideal time to reevaluate both your savings rate for retirement and your overall asset allocation," says Carla Adams, founder of Ametrine Wealth. Adjust your stock exposure if it's overly aggressive (e.g., 80% or more in equities), but be wary of becoming too conservative. "Your true time horizon is not your desired retirement age but your lifespan," says Adams. As more people live into their 90s, this means considering a plan that caters to 30 or more years in retirement.
- Don't Rush Into Retirement "Steer clear of the temptation to retire too soon," FitzPatrick warns. Even a moderate delay can extend your savings, maintain your health insurance, and boost your Social Security benefits. A 2018 study by the National Bureau of Economic Research found that a 66-year-old worker's retirement income could increase nearly 8% if they worked an additional year and delayed claiming Social Security by a year.
For those who don't wish to continue working full-time, exploring part-time opportunities or transitioning to a less demanding yet fulfilling career can be a viable alternative.
In short, your 50s demand that you take your retirement plan seriously. This doesn't just mean saving more - it involves thinking holistically about health care, tax efficiency, income timing, asset allocation, and lifestyle choices. By adopting the right strategies and making crucial adjustments, you can make your 50s your most impactful decade yet for building the retirement you desire.
- In the process of maximizing your savings, consider investing some of your funds in alternative financial ventures like token sales (ICOs), as they might provide an additional stream of income for your personal finance and retirement plans.
- As you reassess your asset allocation during your 50s, consider diversifying your portfolio to include investments, such as cryptocurrency mining, to hedge against market risks and ensure a balanced and long-term growth for your personal-finance and retirement needs.
