If you’re about to hit age 50 and you’re wondering if and when you may ever be able to retire, you’re not alone. Retirement seems like a far-distant dream to many Americans.
That’s because most American families, even those approaching retirement age, have little or no retirement savings. Worse still, the average American household also has $139,500 in total debt, and that figure factors in households with no debt whatsoever.
Of course, every person’s financial situation is different, but as a general rule, regardless of how much or little you have in savings and how much or little you have in debt, doing something now, having a plan and sticking to it are the most important things you can do to ensure you’ll be able to retire at some point.
“Regardless of age, there is always time to save for our future,” said Tyler Landes, a Certified Financial Planner and founder of Tandem Financial Guidance in Kansas City, Missouri. “We tend to see retirement as the end-point for investing, and we think if we haven't saved by now then what's the point? But retirement isn't the end, and if we're lucky our money will need to last 30 years or more. Even money saved late in the game can have a significant effect years down the road.”
Here are 11 things you absolutely need to do to ensure you’ll be able to retire while you’re still young enough to enjoy it.
1. Pay off your debt. Do it now.
Talk to any financial advisor and they’ll say the most important thing at any point in your financial life is to pay off your debts and do so as soon as possible. That’s especially important as you enter your fifties because you’re getting close to retirement age and you’ll want to be able to save every penny possible for the future. (You may find this guide helpful if you’re looking for a credit card to help you pay off debt.)
2. Create a budget & stick to it
If you don’t already have a budget in place, it’s time to create one. You aren’t going to be able to successfully pay off debt and save for retirement unless you know exactly what your monthly cash flow looks like. Grab a pen and paper or sit down at your computer and lay it all out in black and white. Be honest. Consider every last cent that you spend each month and account for it. Only then can you see exactly where you can cut back, make corrections and get your finances in order.
3. Pay off your mortgage ...
If you are still paying mortgage payments on your home, you may want to consider making additional payments toward it so you can pay off your remaining balance sooner. Having your home paid off can be a great asset in retirement.
4. ... or downsize
You can also consider moving into something smaller and more efficient, particularly if you have more house than you actually need. This can be an especially good idea if you don’t own your own home because you can put more of your monthly budget toward savings.
5. Max out your contributions ...
If you aren’t already contributing the maximum amount to your 401(k) ($18,000 for 2017) and taking advantage of any employer contributions your company may offer, it’s time to start doing so.
6. ... & start making catch-up contributions
You’ll also want to take advantage of the increased amount of $6,000 you can contribute to your 401(k), 403(b) or 457 beginning at age 50.
7. The same goes for your IRA
If you don’t have an IRA, it’s a good time to consider one. Like your 401(k), your IRA also allows for catch-up contributions beginning at age 50. You can increase your annual contributions from $5,500 to $6,500.
8. Have a plan B
Things happen. In 2008, when global markets tanked, a lot of people on the verge of retirement had to rethink things, and quickly. Even if you think you’re on track to have enough saved to retire at age 65, it’s good to have a backup plan. Will you continue to work at your current job? Start your own business? Work part-time? Sell your home and live off the proceeds? And if you do leave your current employer, will you have enough to pay for any additional health insurance needs you may have?
Think about what you want in your retirement years and make sure you have a fall-back option in case things don’t go quite the way you planned.
9. Use your hobbies to create income
Part of your backup plan can be coming up with a creative income strategy for your retirement. Do you love photography? Consider setting up a portraiture business, covering local sporting events or selling your landscapes through an online marketplace like Etsy. Do woodworking in your spare time? Consider selling your creations. Are you an expert in some field? Consider teaching as an adjunct professor at a local college or university. On a fixed income in retirement, these things can generate enough income to keep you comfortable while also keeping your body and mind engaged.
10. Have a social security strategy
People can start taking Social Security benefits beginning at age 62, but if you were born after 1960, you won’t get your full benefits until you reach age 67. For folks who need their benefits at age 62, that means they’ll only ever receive about 70% of their annual benefit.
There is, of course, also the possibility that Social Security benefits, as we currently understand them, may be dramatically different or non-existent by then. That’s why it’s important to have your own savings. In particular, it’s important that you ...
11. Talk to a financial advisor
So many people these days try to do their own retirement planning. And while self-directed investing has been simplified significantly, it’s good to keep in mind that you’re probably not an expert. Just like you probably wouldn’t try to build your own home from the foundation up, you may not want to go it completely alone when it comes to building your retirement savings.
There are lots of financial advisors today who offer free consultations, and the guidance they are able to provide for your finances and investments can more than pay for any fees they charge. If you’re worried about the cost, look for planners who are paid by the bank and/or investment firms they work for, not by their clients.