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Retirement Planning By The Decade- Your 50s

Tips for retirement planning in your 50s

In your 50s, retirement is beginning to feel more real. As you reflect on where life has taken you and where you want to be in the future, retirement takes on a clearer picture of what you want your lifestyle to be at that stage of your life. This can also be a tricky decade for you. People at this age are usually in their peak earning years, and may now have fewer expenses, with children no longer at home (hopefully), mortgages such as home loan have been significantly paid down, and generally your wealth will be greater than the decade before.

Of course, the trick part is the dangers around. Funding higher education for your children can put a dent in your retirement saving, illness and disability, as well as, layoffs are real possibilities. These, along with high debts, can cripple finances. Poor planning, insufficient insurance protection and adult children who return home, all pose additional risks to your financial retirement security. If you had not commenced planning and saving in the previous decades, did not plan properly or just did not save enough, you now need to make crucial decisions, such as the timing of your retirement, where you will live and the lifestyle you can afford, in order to get yourself in the best financial shape possible at this milestone.

Some of the factors you will want to take into consideration are: Putting your retirement on the front burner. You may have other obligations relating to your immediate family such as your children’s education or providing for you aging parents, but saving for your retirement still needs to be your priority, more so now than ever. You are close to the finish line but there is still a bit of way to go. Begin to actively plan for the lifestyle you want to have and determine what it will cost. Think about factors such as what age you want to retire, where you will live, what will activities you will now get involved with on retirement.

Reconsidering your career choices. If you have just started to save for retirement the longer you are employed the less you will need to save. Work can have social, emotional and economic benefits, but what if you hate your job and was looking forward to leaving? Now would be a good time to determine if part time work in another field would be right for you or would it be better for you to start your own business on retirement. Despite the benefit to be gained from going back to school and learning a new skill or increasing your knowledge, your 50s would not be a good time to do so on a full time basis by using borrowed funds or dipping into your retirement savings. You are unlikely to recoup the investment and you could end up saddled with educational loan repayment well into your 80s. At this stage of your planning if you are going to reinvest in yourself do so out of current earnings. If you are going to start a business do so now while you are employed to test if it is viable for the long haul.

Accelerating debt payment. If you are just starting to save ever extra dollars should go toward your retirement savings, but where you have met your saving goals and have received additional funds use these to pay down your debts. This will allow you to be able to live on less when you retire as your expenses will be less. Start off with your credit card, doing this by stop paying just the minimum payment each month and applying as much as possible to your card balances.

Begin to save and invest aggressively but not recklessly. It cannot be said often enough: ensure that you are saving the maximum allowed in your employer-sponsored superannuation fund or a retirement scheme. If you are not doing this already, begin to do this now. If you are already doing so then start to take a look at other saving options and top up the funds you are setting aside, including your emergency fund. Don’t be too conservative, as you still have several decades for your retirement earnings to grow. Note that this depends on when you decide to retire, as well as when and how much of your retirement fund you draw down in the years ahead.

Consider downsizing your current lifestyle. Your focus now is on preparing yourself for the future. You may wish to consider relocating or downsizing your current housing accommodation. If you are living in a property which requires high maintenance, including mortgage payment, you may wish to sell and purchase a smaller less expensive home, or rent it either partially or in full, identifying cheaper but comfortable accommodation which will allow you to save more. In doing this, you would have been able to take out the equity existing in your home. This would have a major impact on boosting your ability to invest more in your retirement saving fund in a short period of time.

Having implemented some or all of the strategies above to jump start your retirement planning or if you had done so in your 20s, 30s or 40s, don’t just stop there. Your 50s is a time for focusing on income growth and reducing risks, consolidation and refining of your retirement assets with your retirement goals and ensuring that any gap that now exists is plugged. These are important years for preparing for your retirement. You have to start preparing yourself psychologically, socially and financially, staying on top of your planning by continuing to follow your checklist.

Your checklist in your 50s should include the following:

Continue saving: Your earning power and ability to save are at their highest. Make the most of this opportunity. Bonuses and other lump sum payment should be earmarked for savings, your emergency fund is now aiming to exceed a balance which will cover one year’s worth of living expenses. Your medical fund should also be in place, as well as, funding to cover expenses relating to your children education and maintenance of your parents and other dependents.

Continue to keep your debt under control: Begin to maintain a lifestyle which will allow you to create as little debt as possible, while you continue to work at eliminating those that you currently have.

Ensure that you have credit insurance in place in case the unforeseen occurs such as lost of job or disability. This will prevent you from having to repay these debts from your emergency or retirement funds. Revisit your investment and tax strategy: As you move into the stage where you will begin to see the benefits from your investments, ensure you are withdrawing wisely and tax efficiently. Investing at this stage typically tends to be a bit more cautious. Time is working against you since you have fewer years to make up any losses. Ensure that your investment portfolio is now positioned to ensure that you earn sufficient income in the years ahead. You should be revisiting your assets allocation, giving consideration to putting more of your higher risk investment into less volatile assets, bearing in mind that you will still require assets in your portfolio that will allow you to stay ahead of inflation and preserve the purchasing power of your income. It is important that you continue to seek professional advice to ensure you are maximizing your opportunities.

Begin to work out your retirement income strategy: Start planning how you will convert your assets to a dependable income that can last your lifetime. Within your portfolio you will have various asset types some of which are not readily convertible to cash such as real estate and others such as stocks which can be sold in a relatively short period time, compared to those that can be considered cash but to obtain maximum value must be encashed in accordance with their contract. By this time you will have decided when you want to retire, how much income you will need and be able to determine what your current retirement savings are projected to be by the time you retire.

Use this information to identify your sources of income for retirement and assess what your monthly expenses will be. Understand the risk of how longevity will impact on your plan, as well as healthcare and inflation. Use these factors to determine what your retirement paycheck needs to be and create a withdrawal strategy that’s right for you.

Do a benefit check up: Bear in mind that you may be accessing benefits from your company superannuation fund or a retirement scheme. Understand these benefits, as well as the role guaranteed income with annuities can play in helping you to meet essential expenses in retirement.

Encourage your adult children to be financially responsible: If your children are out of school and not disabled, they should be economically independent. If they are still reliant on you for financial support they are putting your retirement future at risk financially as well as their own. Take steps to prevent this from occurring now.

Review the safeguards in place for your financial future: Always ensure that you are protected from the unexpected. Review your insurance coverage to ensure that your family is adequately protected as well as your assets. Life Insurance will ensure that they have replacement income in the event you don’t outlive your spouse or vice versa. Disability income insurance will ensure that you continue to have a source of income should you become disabled before your planned retirement age. This will prevent you from accessing your retirement savings before the due date. Your home and or other real estate investments are important retirement assets within your portfolio and you need to ensure that at all times that they are sufficiently covered with homeowner’s insurance to secure you against any losses.

Complete Estate Planning: Ensure you have taken steps to protect your legacy and minimize the tax consequences for your beneficiaries. Awill should be in place or a trust for the distribution of your assets in accordance with your wishes.

Consider giving a trusted person durable power of attorney to make financial and other such designated decisions for you in the event that you are unable to do so yourself. Seek the assistance of a professional such an attorney to guide you through this process and develop the various legal documents.

Revisit your retirement lifestyle plan: Is the lifestyle you envisioned in your 40s the same one you want to continue to plan towards as you now get closer to retirement?

What about your spouse? Have you shared your vision with him/her and are their goals a part of this plan? It is important that you both discuss and work out any difference in lifestyle from now. Are you now contemplating early retirement and the cost involved in doing so? Can you afford the lifestyle you are thinking about based on your current savings and expected benefits, as well as investment balance at retirement?

These just some of the questions you need to begin to ask yourself as you review and refine your retirement plan. This assessment needs to be carried out as quickly as possible as it will impact how and if you can fund your retirement goals when the time comes to do so.

Practise your retirement lifestyle plan: You may be thinking of starting a new career, moving to a new parish or country, doing social work or just taking on a new hobby. Practice is the only way you will know for sure that you will enjoy doing these things for a lifetime.

Visit the place you are planning to live on retirement, do so at varying times, so you can get a good feel of what it would be like to live there. Get involved with the various social and charity clubs and begin to play an active role. Start that new business part time, which will give you the bonus of additional income now, and allow you to easily incorporate it in your lifestyle. By doing this you are well on your way to creating the lifestyle you envisioned.

Continue to seek Professional Advice: Your 50s is no different than the other decades before. As you get closer to retirement your need for professional advice increases.

Continue to maintain a closer relationship with your advisers as you seek to refine and monitor your overall retirement plan, to ensure success. Continue to stay on track. It is more important than before that you remain focused; one wrong move could spell disaster for your retirement lifestyle plan. Continue to manage your finances wisely, reduce your expenses/debts, periodically review your retirement goals and ensure they are still applicable in light of the changes that may have occurred in your life. You are at the peak of your earning power, make sure that you use this to your advantage to increase your retirement savings and ensure financial stability at all times.

Good retirement planning changes as your life progresses based on your circumstances and life events. Your strategy must always be open to ongoing monitoring and adjustment. The most important step in preparing for retirement is developing a plan that fits your lifestyle and in your 50s you will have refined what that lifestyle will be. There is never a right or wrong retirement plan, just one that suits you and your family.

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