This story originally appeared on NewRetirement.
Financial planning for retirement takes a more focused turn through your midlife years–from your late 40s through your 50s and into your 60s.
At midlife, your income is usually better than when you were younger, and you’ve got more information to work with.
If you’re already saving, this period means adding new layers to your existing retirement plan so that it can bloom into something bigger. If not, it means buckling down and making up for the lost time.
Whether you’re late to the party or moving forward with bigger plans, here’s a retirement planning checklist for mid-life.
1. Make Sure Saving Is Second Nature
By the time you reach your late 30s, you should already have a good handle on tucking money away for retirement. One recommendation is that you should have about 1.4 times your annual salary set aside by the time you’re 35, 2.4 times when you’re 40, and 3.7 times by age 45. When you reach 50, you’ll want 5.2 times your annual salary saved.
However, those are just benchmarks. You should consider using a retirement calculator to assess how much money you should be saving. The NewRetirement retirement calculator will give you a highly personalized number for exactly how much money you will need at three different time periods in your future. Best of all, you can adjust all of your data until you figure out a plan that is achievable.
Some finance experts say that in your 40s, you’ll want to have a nice, long chat with a financial planner. They can help spot problems, and give you a more accurate idea of your overall financial fitness as it applies to retirement.
If you aren’t maximizing 401(k) or IRA contributions, now is the time to take advantage of every tax-deferred penny.
2. Invest With Purpose
If investments make you nervous, they shouldn’t. You don’t have to watch the market every day and read all of the financial magazines, although that doesn’t hurt. And you don’t have to be a hardcore trader to put your money to work so that it can grow.
You might consider thinking like a pension manager, since that’s what you’ll be doing. A trader takes lots of high risks in the hopes of a major payout.
A pension manager understands the goals of any investment and forms a slow and steady strategy that helps meet the future need. “The result is a calmer, more predictable investing style that more often meets its goals,” they explain.
With a 401(k), IRA or both, plus modest long-term investments, the time period between your late 30s and your 50s should help you beef up your retirement savings into a strong, dependable foundation for later.
3. Set Goals and Priorities
There is a reason that this time is famous for crazy antics and crises. But, a midlife crisis does not have to be a bad thing.
Your 40s and 50s are an ideal time to take stock of what you have done and what you still want to do. With whom do you want to spend time? Where do you want to live? What do you want to be doing?
All of your goals and priorities should be worked into your retirement planning.
4. Create and Maintain a Retirement Plan
Retirement may still be a decade or more away. However, it is not too early to create a detailed retirement plan. Creating a plan for when to quit your current job, when to start Social Security, whether you will downsize or not, how much you can spend every month and more will help make taking action now even easier.
Creating a plan is like visualizing your future. You can see what else you need to do and the importance of the steps you are taking now for a secure retirement. Midlife is a time when goals can become clearer because you have so much more information to work with. Where before, you only saved what you could toward a somewhat fuzzy goal, now some of the shapes on the horizon are starting to clear up.
And, as time goes by, you simply need to update your plan, making adjustments based on your evolving goals and situation.
5. Bump Up Your Savings When the Kids Leave Home
As your kids get older, you can probably cut back a little more, streamline your budget and build up your savings.
And, research shows that when the kids leave home (or graduate college), is a huge opportunity to really start saving a lot more for retirement. The idea is that you start saving all of the money you have been spending on the kids.
6. Try a Sabbatical or Mini-Retirement
Think again if you believe retirement at age 50 is impossible.
Sure, maybe you cannot quit working forever, but maybe you can “try on” retirement and see what it feels like.
More and more people are doing a mini-retirement by taking a month or year-long sabbatical from work. Some temporary retirees opt to spend time with family, others pursue a hobby and still others explore alternate work arrangements as a second career.
Midlife Is the Time for Key Decisions and Taking Action
Saving and saving more is key during midlife. Getting a handle on your retirement plan is another critical checklist item.
But, there are also many other big decisions to make and instead of just thinking about retirement, you need to take some actions. The following factors can drastically impact how much retirement savings you will eventually need:
- If you’re a homeowner, you probably want to consider whether you’ll stay put and pay off the house, or if you’ll likely have a mortgage in one location or another forever. Housing is usually a household’s most costly expense. You will need a lot less in retirement savings if you have paid off your mortgage.
- Can you get serious about paying off debt? Especially non-mortgage debt?
- Health issues might emerge during this time that direct your planning toward long-term health care, and you’ve got a good handle on your money management style.
- Will you help your kids pay for college or prioritize retirement savings?
- When do you want to leave your current job? Will you transition into retirement or stop working cold turkey?
No two people have the same life experiences, and no two people want the same thing out of retirement. And there is more than one way to achieve a secure retirement.
Now is the time to set more focused goals and tweak your saving and investing strategies to make your retirement exactly what you need it to be.
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