Written By: Troy Johnson
The kids are almost out of the house, the mortgage is nearly paid off, you’re earning more money than you ever have in your life, and retirement is right around the corner. That is if you’ve done your planning. You’re 50s should be the time in your life that you see all you have planned for starting to take shape. At this point, you should be feeling confident about your financial position.
Even if you feel like you are on track to reach your retirement goals, you need to remember that now isn’t the time to make a mistake. You’re in the fourth quarter of this game, and there is no time for fumbles or turnovers! Now is the time to keep marching down the field and run up the score on the scoreboard. It is more critical now than ever to have a written retirement income plan. Do you know what your income will be each month in retirement? Do you know from which accounts you will first begin to withdraw income? Have you decided when your spouse and you will file for Social Security? You may have a few more years left before you retire, but you need to begin answering these questions now.
So what money moves should you be making in your 50s? For starters, take advantage of the catch-up contributions in your 401(k) and your IRA. By this point, you should have most of your debts paid off, allowing you to save even more than you already have been. When you turn 50, you can add an extra $6,000 per year to your 401(k) for a maximum contribution of $24,500. You can also contribute an additional $1,000 to your IRA for a maximum contribution of $6,500. If you are behind on your retirement savings, these catch-up contributions can get you back on track fast!
Everyone wants to know how much money he or she will need to retire. We believe the answer to this question is really more about your income need than your pile of money. For example, a person with $100,000 saved for retirement and a $6,000 per month pension may be better off than someone with $500,000 and no other sources of income. However, as a general rule, your goal by age 55 should be to have 4x-5x your salary saved. Having this sum of money stockpiled will give you a pretty good chance of continuing to live the lifestyle that you are accustomed to now into retirement, depending on your income need. Remember, you don’t want to have a significant decrease in income when entering into retirement; you have far too many cruises and grandkid’s Christmas presents ahead of you…you’ll want to be able to pay for them.
Hopefully as you are reading this blog, you are enjoying a nice self-pat on the back and thinking to yourself that you are where you need to be. If that’s not the thought going through your head, then now is the time to do something about it. Choose an advisor who is right for you, get a written plan together, and start putting yourself in the position now to have a retirement that you can enjoy. After all, you have been working your whole life for this vacation!