Nearing Your Next Act
As your retirement gets closer, look for ways to keep expenses down after you stop working full-time. This is also the time to develop a retirement income plan. Also, take advantage of the IRS’s catch-up contribution rules.
With retirement drawing nearer, it’s important to keep saving for your financial future while paying college tuition bills, a mortgage, and perhaps the cost of caring for your elderly parents.
401(k) to help you save even more.
- Refine your retirement strategy
Starting now, and every six months, refine your retirement strategy to make sure it’s realistic.
Remember that, on average, women live longer than men, so you’ll need to save more for retirement than a man would. Plan on having enough in savings to help carry you over the next 20-30 years or so after you retire.
- Gain a clear picture of your retirement expenses
Will you be traveling more in retirement to visit your kids and grandkids? Eating out frequently?
Use the Wells Fargo Expenses and Income Needs list to project what you’ll be spending in retirement. Then look for ways to trim those expenses, without depriving yourself.
- Create a retirement income plan
Determine when you should withdraw your retirement savings, how much you should take out, and which accounts the money should come from.
Your retirement income ought to be large enough to meet expenses, but small enough so you won't run out of money. The Wells Fargo Creating Your Retirement Paycheck will help you figure out what’s right for you.
- Consider funding a 401(k) or 403(b) plan while you still can
You’re likely in your peak earning years, which make your 50s an ideal time to contribute to retirement plans.
But since you might be leaving your job within the next few years to start your retirement, consider funding a tax-deferred 401(k) or 403(b) savings plan to the max while you can.
- Think about taking advantage of the catch-up rules
Once you’re in your 50s, you can contribute an additional “catch-up” amount to your IRA and your 401(k).
For IRAs, this means you can contribute $6,500 ($1,000 above the standard limit) in 2014; for 401(k)s, you can put in $23,000, a full $5,500 more than the standard limit in 2014.
- Keep your portfolio diversified
In your 50s, with retirement approaching, you’ll want to balance your need for growth with your need for security.
- Look into long-term care insurance
If you or your husband develops an extended illness in retirement, the cost could wipe out your estate.
Look into buying a long-term care insurance policy now to protect yourselves later. Premiums can become quite costly if you wait until your 60s or 70s to buy a long-term care policy.
- Work with a financial advisor
A financial advisor can help you plot a strategy and take advantage of the best ways to save for retirement.
Catey Hill is money editor for the New York Daily News online and author of SHOO, Jimmy Choo!; The Modern Girls’ Guide to Spending Less and Saving More.