Staying on Track
Now’s the time to fine-tune your retirement strategy. Look for ways to lower expenses, such as paying off your mortgage faster. Then you’ll free up money in retirement so you can enjoy yourself more.
- Fine-tune your retirement strategy
Now that retirement is coming into focus, spend some time reviewing and adjusting your strategy. Will you have enough in savings? Will you work part-time in retirement? Where will your retirement income come from? Once you’ve plotted out a roadmap, update it every six months or so.
- Pay off your mortgage as quickly as possible
By retiring your mortgage soon, you won’t be saddled with this expense in retirement. That will give you more freedom to travel and see friends and family as well as new vacation spots. Consider paying a little extra on your mortgage each month or making biweekly mortgage payments to pay off the loan faster and to pay less in interest. Talk to your lender about these options.
- Add up your anticipated retirement expenses
It’s a good time to begin estimating how much you’ll be spending in retirement. Your costs for health care and eating out might go up, but your clothes and work expenses may well go down. The Wells Fargo Expenses and Income Needs list can help you come up with the numbers.
- Estimate how many years you’ll be retired
On average, women live longer than men. As a rule of thumb, given today’s longevity statistics, when you’re in your 50s, plan to have enough savings to live on for at least 30 years.
- Consider taking full advantage of tax- advantaged retirement plans
Since you (and your spouse or partner, if you have one) are probably earning good money now, consider contributing the maximum to your IRA and 401(k) or 403(b). If possible, try to save 20% of your income.
- Use the IRS catch-up rules to save more
Once you’re in your 50s, the IRS lets you 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.
- Monitor your investment mix
In your 50s, you’ll want to balance your need for growth with your need for security. By utilizing a suitable asset allocation strategy and dividing your dollars among a variety of investments, you can decrease the likelihood that all the investments in your portfolio decline at the same time. Of course, by the same token, it’s also unlikely that every investment in your portfolio would go up at the same time. Bear in mind that although asset allocation can help diversify your portfolio, it does not protect against fluctuating prices or uncertain returns.
- 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!