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1. Consider What You Want to Do During Retirement
Many of us don’t think about retirement as a time to sit around and do nothing. Instead, it’s increasingly seen as the next stage of life. If you haven’t thought about what you want out of retirement, now is the time to give it serious thought.
Do you expect to travel more? Will you start a new business? Do you want to volunteer or work part-time? Is there a hobby you want to pursue? Figure out what you want your life to look like after you retire from your current job and move on. This is vital so you know how much money you’ll need–and what you’re going to do with that money.
When to begin drawing your Social Security benefits is one of the most important decisions you’ll make. Timing depends on a number of factors, including the state of your tax-advantaged retirement accounts, what you might expect for required minimum distributions (RMDs) later, your health and life expectancy, and other items.
While you can’t take Social Security until you’re in your 60s, now is a good time to strategize. Sit down with a retirement professional who can help you run through scenarios so you can put together a plan.
3. Use Catch Up Contributions for Your Retirement Accounts
If you’re maxing out your 401(k) and/or IRA, you can put extra money in while you’re in your 50s. Take advantage of these catch-up contributions. A little extra in your tax-advantaged portfolio each year throughout this decade can make a bigger difference than you might think.
When possible, contribute as much as you can to your accounts, especially if you haven’t had the means to make bigger contributions earlier.
Early Retirement Issues
Don’t forget that early retirement comes with its own issues. You can’t take money from your tax-advantaged retirement accounts without a penalty until you reach age 59½, so you might need to plan for using taxable investment accounts for income, or starting a business, or looking at some other way to generate revenue. If you know you’ll need money before age 59½, consider diverting some of what you’d use for catch-up contributions toward accounts that are more accessible when you need the money.
4. Get Rid of the Last of Your Debt
One of the best things you can do before you retire is to get rid of your debt. You might still have some lingering mortgage or student loan debt, or perhaps a car loan. Maybe there’s still a little credit card debt. If possible, create a debt repayment plan that will help you get rid of the last of your debt during this decade. You’ll be able to better position your finances for the future once that debt is gone.
5. Review Your Estate Plan
Follow up with your estate plan. Make sure your beneficiaries are up-to-date and re-read your will and other documents. Your healthcare directive, power of attorney, and other documents should all be reviewed for the most up-to-date information.
Now is also a good time to review your life insurance situation. If you have a term policy, there’s a good chance that it’s expiring soon. Do you need to renew? You might be able to save money each month if you don’t renew your life insurance. Consider any dependents you have that might rely on the money, as well as debts, and make a decision.
6. Consider Long-Term Care Insurance
Now is also a good time to evaluate the merits of long-term care insurance. When you get out of your 50s, premiums can go up quite a bit. This is your last chance to get a policy at a price that is somewhat affordable. Consider the likelihood that you’ll need to be in a facility, and realize that Medicare and Medicaid might not provide you with the resources you need.
If your nest egg is large enough, you might not need to worry about getting long-term care insurance. You might have enough to cover whatever costs you incur. Carefully review your situation and decide if long-term care insurance should be part of the picture.
7. Coordinate with Your Partner
If you have a partner, make sure you’re on the same page. Do you both agree on what retirement should look like? Hopefully, you’ve been having money talks throughout your lives, and you have the same values and goals for your money. However, if it’s been a while since you’ve touched base, now is a good time to follow up and see where you stand.
Also, it’s important to consider that you and your partner might retire at different times. How will you handle that? Additionally, make your partner a part of your Social Security calculations. Depending on your circumstances, it might make sense to take spousal benefits instead of your own. Going over the implications with a knowledgeable professional can help you make a better plan, coordinating when each person should apply for Social Security, and how much to take from each person’s tax-advantaged accounts — and when.
8. Talk to Your Children About Your Arrangements
You also need to speak with your children about your financial situation and plans. Make sure your children are aware of the plans you have for your money, and that they are aware of your wishes. It’s not always a comfortable conversation, but it’s one you need to have if you want to be taken care of later.
Follow Up with Your Parents
Don’t forget to follow up with your parents as well. Make sure you’re in touch with them about their financial situation. You might need to plan to help your parents with some expenses, and you need to be aware of their own wishes and arrangements. It’s a lot to take in, but it can save you from unexpected problems.
9. Keep Some of Your Portfolio in Growth Investments
As you move through your 50s and approach retirement, it’s tempting to put most of your money in bonds. However, while you do want to reduce the risk in your portfolio, it’s also important to keep some of your money in growth investments.
With life expectancies growing, and healthcare costs in retirement rising, you need a portion of your portfolio earning higher returns. Consider using a bucket strategy that focuses on putting money that you won’t need for at least seven to ten years in growth investments that can continue to prop up your portfolio.
Everyone’s financial journey is different. What money moves you make in your 50s depends largely on what you’ve done in the previous decades. However, this is the time to stop and think about how you’ll support yourself in the remaining years of your life. Whether you work for another decade or two, or whether you retire early, you need to understand your options and map out a strategy.