You’ve been contributing to your retirement account for decades with the thought that retirement is a long way away. Now that you’re in your 50s, retirement may be just around the corner and it’s time to put retirement planning in the forefront of your mind. Now is a great time to review the current status of your retirement assets and determine if you are on track to achieve your goal. If you are not on course, a retirement plan review can help redirect you to a secure financial future. Continue reading to learn about preparing for retirement in your 50s.
Reassess Your Goals
Over the years, you may have just been contributing to your retirement accounts without an overall nest egg number in mind. You also may have been working towards a specific goal all along. Now that you are in your 50s, it’s important to know if you are on track to meeting your goal since there is limited time to save all that you need. To start, take a look at the balances in all of your retirement accounts, including 401(k)s, IRAs, mutual funds, and more.
Once you have determined where you are, you need to figure out where you should be. At this point in your life, you will have a better idea of the type of lifestyle you want to have in your golden years and what living and potential medical expenses you will have. You should also consider any additional retirement income you will have, such as Social Security benefits. This estimated budget will help you set a specific retirement goal. You can also use a retirement calculator to help.
Pay Down Your Debt
Contributing more to your retirement savings could be prevented by debt payments. For many people in their 50s, a mortgage is their largest, and possibly only, debt payment. If you have more than just your mortgage, work on paying down these debts to prevent them from making their way into your retirement. Multiple debt repayments make living on a fixed income more challenging. If you only have your mortgage left, consider paying it down quicker or look into options for refinancing. This will help free up more funds for retirement savings and future retirement income.
Utilize Catch-Up Contributions
Once you are in your 50s, you can take advantage of catch-up contributions. For 401(k)s, you can contribute an extra $6,500 in addition to the $20,500 contribution limit in 2022 for a total of $27,000. For IRAs, you can contribute an extra $1,000 in addition to the $6,000 contribution limit for a total of $7,000 in 2022.
Start An HSA
If you are currently enrolled in a high-deductible health plan, a Health Savings Account (HSA) is one of the best ways to save for medical expenses in retirement. You can contribute pre-tax dollars, have your earnings grow tax-free, and make tax and penalty-free withdrawals for qualified medical expenses. According to Fidelity, a couple in their mid-60s can expect to spend $285,000 on healthcare costs in retirement. This does not cover nursing homes or assisted living, making those additional costs that you need to account for.
Retirement planning is a decades-long process, which gets even more important in the decade before you retire. If you need assistance getting financially ready for retirement, our advisors at Curo Private Wealth are happy to help. We can help you pick the most beneficial retirement planning strategies based on our knowledge and expertise. Schedule a consultation with us today to get started.