Retirement Guide for People in Their 50s

May 1, 2018

People now are staying active far longer, and many are working after retirement or aren’t retiring at all. If you don’t intend to work past retirement age, you need to be taking some things very seriously in your 50s while you still have time to make changes and adjustments to your retirement plan. If you don’t have a retirement plan, it is critical to create one now. Following our retirement planning tips for people in their fifties will help you craft your ideal retirement plan.

Planning Retirement Age

The first thing to address is when you want to retire. Will you try to retire early or wait until 65 when Medicare kicks in? Perhaps you plan on working until you are over 70 at which time you will have to start taking distributions from many retirement accounts. If your company has a pension plan, it also may have limits on when you can start drawing benefits. Deciding now when you will retire helps make the decisions about the rest of your retirement plans.

man in 50s

Details of Your Plans

Will you move after you retire, and if so, where do you want to live? What will your expenses be after retirement? How will you spend your time after retirement? Now is the time to start turning your retirement dreams into reality. Take the time to write down your goals, so you know what targets need your attention.

Figure Out Your Needs

As part of firming up your plans, figuring out your costs is an important step. What are your bills each month? How much will Medicare, or other health care, cost you? When figuring out your needs, be sure to include the cost of things you want to pursue in retirement. Also, when calculating your needs, remember to consider your life expectancy. While pension and Social Security payments might last as long as you live, your other assets and savings are finite and will need to be divided out to cover expenses throughout your life. The Social Security Administration says the average lifespans for those who reach age 65 are currently trending to the mid-80s although one out of 10 will live past 95.

Take Stock of Your Assets

Hand in hand with figuring out your needs is adding up the retirement funds you already have. Take the time to know exactly what your assets are. You should know how much you have in savings, both retirement accounts, other investments, property, expected Social Security payments, expected pension payments, and cash savings. Once you know how much you have, you can compare it to your needs to figure out how much more you will need to save before retirement to cover those needs.

Last Minute Savings

The average American between the ages of 50 and 54 only has just under $92,000 in IRAs with the average being about $122,000 for those between ages 55 and 59. That’s not a lot to live off of for the rest of your life. Once you pass the age of 50, IRS rules allow you to make catch-up contributions to many retirement accounts to give you a chance to bulk up your tax-advantaged retirement savings.

Retirement Savings Plans Catch-up Contribution Allowed (2018)
401(k), 403(b), SARSEP, 457(b) $6,000 (possibly higher for 403(b)
SIMPLE IRA, SIMPLE 401(k) $3,000
Roth IRA $1,000

403(b) plans get the most flexibility by providing those with 15 years of service or more a chance to make additional catch-up contributions over the $6,000. The extra amount for 403(b)s does have more complex rules, so it is best to verify with your plan administrator what level you qualify for, but it could be as high as $21,000 in some cases.

Pay Down Debt

Why pay interest when you can put funds into savings or investments to receive interest? The average rate of return for the Standard and Poor’s 500 Index from January 1970 through December 2014 comes out to around 10 percent, with the 10 years ending in December 2014 only being a bit over 8 percent. Take a look at your retirement savings return rate. If it is doing better than 8 percent to 10 percent, congratulations. However, having debt where you pay interest means you are losing money at the rate of your return percent plus the interest percent. Now is the time to start getting rid of liabilities, especially debt that is costing you more than your money could earn elsewhere. Credit cards and other high-interest-rate items should be first on your list. Taking the small bite out of income now to pay off high-interest debts will remove monthly payments sooner to save the cost of interest. This frees up income for investment in your retirement savings.

Consider Downsizing

If you don’t plan to move to a new city after retirement, consider downsizing now instead of waiting until retirement to sell your home. Mortgage and home upkeep are the most significant costs for most of us, and downsizing now could free up a lot of money for retirement savings. While mortgage interest costs are usually lower percentage rates than other types of debt, the sheer volume of the funds involved makes downsizing an attractive possibility.

If you have already paid off your home, downsizing can free up an even higher amount. Take some time to look around the surrounding area within commute distance to your job and find the place you would like to spend the next phase of your life. If you intend to move to a far-away locale after retirement, downsizing may still be a possibility although you should take a serious look now at resale values and housing demand where you are considering buying so you can sell the downsized home easily after you retire.

Bottom Line

Preparing in your 50s for retirement makes sense. Take stock of your finances to see if they meet your needs from expected retirement age through your average lifespan. Downsize your debt and possibly your home during this period. Finally, take advantage of last-minute savings options with your investments.



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