If you are in your 50’s and like many of your generation, you’re looking at your net worth and asking “Is this really all I have?” Between raising young children, college tuition, home improvements and unexpected health developments, it’s easy to see why some people aren’t reaching their retirement goals. But it’s not too late. Hopefully at this point you’re in your peak earning years, so now is the time to start saving more seriously.
Here are some things for you to consider:
- How many years until you retire?
- Does your company offer an employer-sponsored retirement plan or a pension plan? Do you participate? If so, what's your balance? Can you estimate what your balance will be when you retire? The IRS provides a “catch-up provision” for those over 50 to assist them in making up for lost time. For example, an individual under the age of 50 is only allowed to contribute $18,000 to an employer-sponsored plan in 2015, where as anyone over 50 can contribute an additional $6,000 for a total of $24,000.
- How much do you expect to receive in social security benefits? One way to get an estimate of your future Social Security benefits is to use the benefit calculators available on the social security Administration's website, www.ssa.gov. You can also sign up for a My social security account so that you can view your online Social Security Statement. Your statement contains a detailed record of your earnings, as well as estimates of retirement, survivors, and disability benefits.
- What standard of living do you hope to have in retirement? For example, do you want to travel extensively, or will you be happy to stay in one place and live more simply?
- Do you or your spouse expect to work part time in retirement?
If your expected income sources are coming up short, there are some steps you can take to bridge the gap. A financial planner can help you figure out the best ways to do that, but here are a few suggestions.
- Try to cut expenses so you can save more for retirement
- Shift your assets to investments that have the potential to outpace inflation, but keep in mind that investments that offer higher potential returns may involve greater risk of loss
- Lower your expectations for retirement so you won’t need as much money
- Consider delaying your retirement a few years
The bottom line is to save until it hurts in your 50s, because if you don’t, you may be in for much more pain in your 60s and beyond. You say your retirement savings is already in good shape? Terrific! Then don’t forget to establish a will or trust, a health care power of attorney, and consider long-term care insurance as your 50s is the best time to do it.