The 50s are a pivotal decade. You are near enough to retirement to feel its hot breath on your neck, and that can be a good thing. It sharpens your focus at a time when you may still have 10 or 15 years of work left, so there’s time to fatten your savings and watch the money grow. At this point, too, you may have been doing a job or honed a skill for long enough to feel a delicious sense of mastery and to be at the peak of your earning power.
These peak earning years coincide with a peak chance for savings. If children finally are on their own, household expenses are lighter than they have been in decades. Rather than spend this freed-up money, sock away savings and pay off debt, bringing you closer to the retirement you’ve hoped for. Here are 12 critical financial moves to make in your 50s:
1. Map out your strategy
Spend a weekend gathering your financial information — your savings, investments and other assets, your debts and bills — and map out your strategy for retirement. Seeing the details of your finances and setting goals for life beyond work will expose the gap, if any between your plans and your savings and spur you to close that gap while you still can.
2. Meet with a fee-only financial planner
This is a good moment, while there’s still time for course corrections, to make sure you haven’t missed any crucial piece of planning. Even people who comfortably manage their own investments can profit from one or two meetings with a fee-only financial planner. It’s important that the person you see charges an hourly fee with no commissions or products to sell, so they can objectively review your numbers, assumptions and plans. Learn how to find a trustworthy adviser by reading Ask Stacy: Do I Need a Financial Adviser, or Can I Manage My Money Myself?
One key question for screening financial advisers: “Are you required to uphold the fiduciary standard?” What this means is that the adviser is required to put your financial interest – not theirs – first. If the answer is anything but “yes,” keep looking. Here are sources for fee-only advisers:
- The Garrett Planning Network, an association of fee-only planners.
- The Certified Financial Planner Board, which certifies practitioners and sets professional standards.
- GuideVine matches people with financial advisers. Read bios, watch videos and look for fee-only advisers.
3. Use retirement calculators — with caution
By your 50s, you should be able to have a realistic idea of what your income will be in retirement. Online retirement calculators are a good, if inexact, way to estimate the monthly or annual income you’ll receive from savings and other sources. Calculators vary a great deal in their accuracy, but they can be useful for setting goals and exposing gaps between your likely income and expenses in retirement.
The more detailed data a calculator collects the more likely its results will be useful for you. One respected calculator is ESPlanner, a free tool created by Boston University Professor of Economics Laurence Kotlikoff. Three other calculators are:
- Vanguard’s Retirement nest egg calculator
- The Flexible Retirement Planner
- AARP Retirement Calculator
Two problems with calculators: They require you to make impossible guesses about the future rate of return on your investments. Also, “[m]ost online retirement calculators do not accurately account for taxes,” says About Money’s Retirement Planning in your 50s.
Because of these issues, it’s a good idea to play around with several different calculators to see how your results can vary.
4. Supercharge savings
If life’s demands have made it hard to save for retirement, your 50s offer a good chance to catch up. You’ll see if you are saving enough by following the three steps above, mapping your retirement, assessing your situation and using calculators to estimate your retirement income.
If there’s a gap between savings and your needs in retirement, ramp up your savings. Shoot for saving 20 percent of your income. If that’s too big a change, “set aside just 5 percent now and make a plan to ramp up your savings by 1 percent every quarter until you reach your target goal,” suggests Interest.com.