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The fifth decade of life is a pivotal time in retirement planning and preparation. By the time you hit 50, you’re no more than two decades from your likely retirement date. That means you’re at an ideal point to revisit your retirement plans — close enough to retirement to have a realistic idea of how you can spend your golden years, but far enough away that you still have a chance to make any necessary course corrections.
Assess your retirement savings
Hopefully, you’ve long since calculated how much you need to save for retirement (if not, now is a great time to do it). Look at your retirement savings account statements and compare their balances to how much you plan to have by the day you retire. Are you on track to hit your goal? If not, it’s time to crank up those contributions a bit higher.
Amp up your contributions
If you’ve been procrastinating on making retirement contributions, now is the time to turn things around. Turning 50 makes you eligible for catch-up contributions to both 401(k) and IRA retirement accounts. For 2017, you can make annual catch-up contributions of up to $6,000 in your 401(k) (in addition to the regular annual limit of $18,000) and up to $1,000 in your IRA (in addition to the regular annual limit of $5,500).
Maxing out your annual retirement account contributions every year starting at age 50 is an excellent way to breathe some life into an anemic retirement savings account. If you manage to save $6,500 in an IRA from age 50 until age 65, earning a respectable yet realistic 7% per year, you’ll have an extra $175,000 to your name. If you can max out your 401(k) by contributing $24,000 a year, you’ll amass another $645,000, assuming the same 7% return.
Review your retirement plans
Sticking to your retirement savings plan can come with one drawback: A plan made many decades before retirement is likely based on a hazy idea of what you’ll actually be doing once you retire. By the time you hit your 50s, you’ll have a much better idea of what you’d like to do — and where you’d like to do it. Take some time to think over how you’ll be spending your days once you retire, and then compare that scenario with the one you based your retirement savings plan on. Are they in sync, or is your revised retirement plan considerably more or less expensive than the original? If your tastes have become simpler, so much the better — you’ll likely have some extra money set aside for retirement, which means you’ll be able to indulge yourself a bit. But if your initial retirement savings plan was woefully optimistic, you’ll need to do some serious extra contributing to catch up.
Consider long-term care
Around 70% of retirees will need long-term care at some point in their lives. Given the high likelihood that you’ll need such care — and given that it can cost hundreds of thousands of dollars — your 50s are an ideal time to review some long-term care insurance policies. You can typically get a much better price on this kind of insurance if you buy a policy in your 50s, rather than waiting until your 60s or even later. If you decide to skip long-term care insurance, you’ll need to set aside a considerable amount of extra money to finance these expenses. You owe it to yourself to at least price out policies and see if they’ll be worth the cost.
What if you’re way behind?
If you’ve put off both planning and contributing for retirement until your 50s, you have a problem. First, you need to start contributing as much as possible to your retirement savings accounts immediately. Second, you may have to cut back on your retirement plans. Starting this late means you’ll have to keep your expenses on the low side during retirement, so taking cruises around the world is out. Third, you may need to come up with some supplementary sources of income to pursue during retirement. It’s nearly impossible to live on Social Security by itself, so if your retirement savings are minuscule, you’ll need to find other sources of money to make up the gap. It’ll be tight, but if you draw up a plan and start doing some major saving, you can still retrieve your retirement. And on the bright side, working at least part-time has been proven to boost retirees’ mental and physical health, as well as their income.