How to Plan for Retirement in your 50s… 6 things to consider as you get nearer to retirement

On Pointe – Wealth Management Edition

How to Plan for Retirement in your 50s… 6 things to consider as you get nearer to retirement.

Ah, the milestone birthdays…

Now they tend to be round numbers instead of the “coming of age” birthdays.

A big day like turning 16 and being able to drive. Your 18th birthday is a big milestone as you can vote and register for the draft! And some of us may not remember their 21st birthday… but after those birthdays we’re reduced to round numbers.

I don’t know about you but turning 30 was different than 40. And I can tell you when I turned 50, it was much more cerebral than the previous decade’s birthdays. So yes, definitely different.

Everyone has their own experience of what it means to be in their 50s.

But one aspect is for certain… you’re closer to retirement. Another point to ponder is, what will your retirement look like? Retirement is to conceptualize your level of financial freedom. And of course, my job is to try and help you maintain your financial freedom.

Let’s analyze what you should do for retirement when you’re in your 50s. Remember, retirement planning should be a comprehensive approach. It should consider your financial goals, risk tolerance, and lifestyle preferences.

Here are 6 key considerations for retirement planning for people over 50.

1-Review your Retirement Goals. Your retirement goals should align with your lifestyle preferences and financial resources. Consider how much you want to spend in retirement. What’s your ideal retirement lifestyle? What financial resources are needed to achieve these goals?

2-Maximize Retirement Savings. People in their 50s should maximize their retirement savings by contributing the maximum allowed. This means retirement accounts, 401(k) plans, IRA accounts, and other tax-advantaged accounts.

Also, because you are over 50, you’ll be able to utilize the catchup provision. For example, you’ll be able to put an extra $7,500/year for your 401(k)-catchup provision for 2023. Already maxed out? Start saving in non-qualified accounts.

3-Invest for Growth. Unless you’re risk averse, you should consider investing for growth. Not all growth investments work in all environments so diversification may help. I generally prefer a tactical allocation of growth investments for my clients. This is to combat “worsification”, more on this in a future On Pointe.

What are growth investments? They may be certain stocks, ETFs, mutual funds, and the like. You may consider working with a financial advisor who specializes in investment management. I might know one!?!?!

4-Plan for Taxes. There is a lot to consider here. Plan for taxes in retirement by considering your tax bracket. Also, you need to know the tax implications of different investment strategies.

A potential idea you might consider is investing in tax-preferred vehicles. If you’ve accumulated a large base of liquid money, you might consider your state’s municipal bonds. They’re triple tax-free for investors who reside in the state where the bond is issued… What is triple tax-free? Free from federal, state, and local taxes.

5-Consider Health Care Costs. May be easily solved with a Long-Term Care policy. Other insurance products such as annuities may provide enough income to handle some health expenses. Some even self-fund their Health Costs. There are advantages and disadvantages, so you’ll need to work through these strategies.

6-Estate Planning. You should work on your estate plan. Starting with a simple will may suffice for more modest estates. However, a large asset base may require trust. There are also other strategies to minimize estate taxes. Gifting or starting a foundation may also be part of your estate plan.

While this list is not detailed, it does touch on some of the bigger bullet points you’ll need to consider. Also, your situation may be different. An exited entrepreneur with several million in assets will likely have a different plan. An executive with a couple of million dollars will have the same real concerns but will likely have a different plan. This is why it can be helpful to engage a financial advisor to work through your plan.

So, as 50-year-olds we do have to adjust our retirement plan….and it’s a much different plan than when we were 21 years old!