It’s the decade before you embark on your golden years, and thoughts and dreams of your retirement are on the forefront of your mind. Perhaps you may wonder whether you’re properly prepared for the years ahead. Following is a list of important tasks to which you should be dedicated during your 50s to ensure a smooth transition to retirement and a profitable future for your family.
- Decide when you’ll stop working.
Do you plan on retiring a few years early? Make sure you give your employer plenty of notice as you work toward that number. Even if you plan on waiting until full retirement age to stop working, your 50s is still a good time to start to begin planning and dreaming about how you’ll spend your time. If you desire to continue working part-time or serve as a consultant for your company, make sure your employer is on board and helps you map out a solid plan well in advance.
2. Map out a Social Security strategy
Get ahead of the game in your 50s and decide on a Social Security plan that fits your situation. While you’re ineligible to sign up for Social Security until you reach age 62, you can still have a plan in place for when and how you’ll claim your benefits. If you’re able to hold off on collecting Social Security payments for a few years, your monthly payments could significantly increase. It’s a good idea to talk through various Social Security strategies with a financial professional that can help you assess your personal situation and decide when you should start receiving payments.
3. Make catch-up retirement contributions
Take a look at your retirement savings portfolio. Are you behind where you you’d like to be? If you have an empty nest and are finished paying for child care and college tuition, use those extra funds to invest in your retirement. Redirect as much cash as you can, including raises, tax refunds and bonuses, to saving for your golden years.
It’s important to remember that at age 50, the 401(k) contribution limit significantly increases by $6,000 to $24,000. You can also contribute $1,000 more to an IRA than people under 50, for a total of $6,500. Needless to say, now is a prime time to make up for falling behind in contributions. Also, taking advantage of these tax deductions for retirement account contributions could save you a bundle of money on your current tax bill.
4. Make the most of tax breaks
If you’re like many Americans, your 50s are your peak earning years. This means you could be in a significantly higher tax bracket than you will be in retirement. A tax professional can help you take advantage of as many tax breaks as possible during this time in order to minimize your tax bill. Remember you may be eligible to take deductions for saving for retirement, as well as health care accounts.
5. Concentrate on paying off debt
Your 50s are a great time to buckle down and work toward paying off debt such as car payments, student loans, and credit card balances. If you ditch these debts before you enter retirement, it could free up extra funds for living expenses, as well as travel and hobbies during your golden years. Start with the highest interest loans first and work your way down. You’ll thank yourself later for your dedication to becoming debt free.
Once all the above debts are eliminated, concentrate on paying off your mortgage before retirement. Think about what you could do with the extra funds that would be freed up by eliminating this large payment. While you will still be responsible for insurance and maintenance costs, paying off your mortgage in your 50s could allow you to get by with less savings in retirement.
The bottom line: Your 50s are crunch time for retirement preparation. The decisions you make now will impact the retirement benefits you receive and how much you will be able to safely spend for the rest of your life. By dedicating yourself to some or all of the above tasks, you may be able to significantly improve your retirement finances for your future.