Financial moves to make in your 50s
At this point in life, you still have a few working years ahead of you. But if retiring “on time" is your goal, you're within 10 to 15 years of saying goodbye to the working world. Now is prime time to take pre-retirement actions that will help you give that final notice on time. After all, this could be your last decade with a paycheck—and by now you know how time can fly.
9 Financial To-Dos in your 50s
Whether you dream of ticking off a travel bucket list, reading more often, nurturing a garden, spending time with family and friends, or a combination of all these, use the tips below to help get you there.
1. Still carrying debt? Pay it down.
Once retired, you'll be on a fixed income. In an ideal world, you'll no longer have regular debt payments after you've stopped bringing in a steady paycheck—that includes your car loans and your mortgage. So, these are the years to finish paying off your house and to wrap up any other loose ends when it comes to debt.
2. Reduce expenses and consider downsizing.
If your kids have officially left the nest, it may be time to get a smaller home and even sell any extra vehicles. This is a great way to lower your living expenses. Plus, selling a larger home or a car not only reduces your future expenses but may also yield a surplus of funds. You can put this extra cash either toward your retirement savings or toward aggressively paying off remaining debt before you retire. Keep in mind that, with a smaller house and fewer vehicles, you may also enjoy lower insurance and maintenance costs.
3. Boost your retirement savings with Individual Retirement Accounts (IRAs).
IRAs offer tax advantages for retirement savings. There are various types with different tax treatments, so saving in both Roth and Traditional IRAs will give you options when pulling money in retirement.
4. Take advantage of retirement catch-up contributions.
If possible, maximize your 401(k) or IRA contributions. Once in your 50s, you can benefit from higher maximum contribution levels designed to help people who are behind on retirement savings to catch up.
5. Begin planning for medical expenses in retirement.
Consider your individual medical needs. Then investigate a potential healthcare plan for retirees and make sure it will fit into your retirement budget. Various “health shares," for instance, provide options for more affordable healthcare plans. Also, keep in mind that the Affordable Care Act (ACA) may include a healthcare subsidy toward your premiums based on your residency, age, and income. If you decide to use this subsidy, make sure you can live within the designated income level to maintain eligibility.
Health Savings Accounts (HSAs) offer another avenue to save for healthcare expenses in retirement. HSA balances roll over, so you can save for current eligible medical expenses while also investing to cover future healthcare costs. Plus, they offer several tax advantages.
6. Secure long-term care insurance.
If you haven't done so already, now is the time for long-term care insurance. This type of insurance coverage can help you pay for the cost of staying in a nursing home—a gap left by Medicare. Many such long-term care facilities come with a price tag of more than $100,000 per year. If you're married, start looking for a long-term care policy around age 55. If you're single, it's safe to wait until 60.
7. Consider a senior checking account.
This type of account is typically available for customers 55 and older. Features vary from bank to bank, but senior checking accounts often include free checks and fee waivers. Look into your options and compare them to see what might work best for you.
8. Further pad your emergency savings.
Retiring early? Try to keep cash available that could cover two to three years of expenses. This way, if the market takes a downturn, you won't be forced into selling stocks at a lower price to cover your living expenses. Savings and money market accounts may be right for you.
9. Draw up a will and/or a trust.
If you haven't established your will and want your assets to be distributed a certain way, this step is a must. Plus, your will can ensure that your spouse, children, and grandchildren know your final wishes. Finally, consider whether your financial and family situation merits a trust.
As you move closer to retirement, ask yourself two questions: Where will your retirement income come from, and will you have enough? Don't forget to factor in when to claim Social Security. To assess your answers and make any necessary adjustments to your investment portfolio and financial plan, consider working with a financial advisor.