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Financial milestone series - Age 50s

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Your 50s may mean juggling multiple financial responsibilities, so it’s important to take a step back and look at the bigger picture. By this point in your life, you might have a family to raise, debt to pay off and a comfortable career that suits your financial needs. With retirement approaching, you should save up a sizeable nest egg and think about how your expensive may change with health needs. Learn how your age can affect your finances as you move through the next chapter of life with our guide to financial planning in your 50s.

Couple and their financial planning in the kitchen with laptop Article Image
Yellow notepad with pen svg icon Lesson Notes:
  • When you reach your 50s, it is ideal to have a sizeable retirement account set aside for your golden years.
  • Compare how much you have saved to how much you will need in retirement to determine if you are on track to reach your goal.
  • Invest in insurance and estate planning to protect your assets in the long term.

4 tips for financial planning in your 50s:

Pay off remaining debts

Most Americans acquire debt throughout their lives, but the longer you hold onto your debt, the more you will pay in interest. Pay off high-interest loans, including credit card debt, as soon as possible by paying more than the required amount every month when possible. Low-interest debt, such as student loans, your mortgage or auto loan, might not be as much of a priority, but it’s still best to pay them off sooner rather than later to save money on interest in the long term.

Calculate how much you need to save for retirement

It’s best to start saving for retirement early in your professional career, but you need to kick your retirement savings plan into high gear once you reach your 50s. If you put a portion of your income in a 401(k) loan or IRA, it’s time to crunch the numbers and determine how much you have saved versus how much you will need to sustain your desired lifestyle in retirement. Check out our Retirement Plan Checklist for more.

Start by calculating your total savings goal based on when you plan to retire and how much you will need to live every year based on the essentials like food, housing, healthcare and transportation as well as non-essential items like shopping and travel, depending on your budget and lifestyle. You may want to research nursing home costs in case you, your spouse or your parents can no longer live alone. Also consider the effect of inflation, as prices will likely be higher 10 to 15 years later.

Don’t forget to include Social Security. Sign up for an account at ssa.gov to see how much you can receive monthly in Social Security based on your current income.

Once you've evaluated your potential expenses, compare the total goal to your current retirement savings to see how much you still need to save. Financial experts recommend having around six times your yearly income in savings by the time you reach your 50s. Divide however much you still need to save by the number of years you plan on working to calculate how much you need to start saving every year to reach your goal.

Work on maxing out your retirement savings if you haven’t done so already. The annual contribution limit for IRAs and Roth IRAs is $7,500 for those ages 50 and older, so you should deduct more from your taxes at the end of the year if you use a traditional IRA.

You may need to save more than the annual contribution limit to reach your goal. Look for ways to invest your money that you can use in retirement even if you don’t qualify for tax benefits. You may benefit from additional retirement accounts such as IRA or Roth IRA on top of your employer-sponsored retirement account.

Increase your insurance coverage

Having insurance is essential to protect your finances later in life. You may encounter health issues even if you are fit and healthy, so make sure you have a robust health insurance plan in case you need to pay for care. You will have to be able to pay your deductible in case of an emergency to have your insurance provider cover the rest. Your spouse and children can also experience health issues, so consider signing up for additional coverage to cover all kinds of emergencies.

While emergencies are unexpected, you can be proactive about your health and sign up for regular screenings. Also, talk to your doctor about life expectancy, which is assessed based on age, diet and health history.

Along with seeking preventative care, consider creating a health savings account to reduce the cost of care in the future. The account lets you invest your pre-tax dollars that will grow tax-free over time. You can then withdraw the money, which will be taxed like regular income, to pay for medical expenses.

You should also sign up for life insurance if you haven’t done so already. Rates increase as you age, so consider signing up while you’re still healthy. This will leave your loved ones with a sizeable benefit in the event of your passing. They can use this money to pay off the mortgage or arrange the funeral, which can cost tens of thousands of dollars.

Speak to a financial advisor

If you haven’t met with a financial adviser, now is the time to start. Find a licensed financial advisor with a fiduciary duty, which means they will look out for your best interest instead of selling you unnecessary products. This person will look over your finances to help you determine how much you need to save for retirement. They can also identify valuable products and tax incentives that can help you make the most of your money. Knowing how much to save can be challenging when you have many responsibilities. That’s why it’s so helpful to have an unbiased source of information to steer you in the right direction.

Financial planning is important at every stage, but especially when you’re in your 50s. From investing to getting out of debt and retirement planning, every decision you make now will affect your finances in the future. Consider speaking with a professional to chart the right path for you and your loved ones as you prepare for the next chapter of life.

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