Your 50s is a time when your earning power and ability to save are high. To help you make the most of this opportunity, here are some tips to consider.
1. Save more
- “Catch up” by contributing more to your employer’s retirement plan and any IRA you may have
- You are now allowed extra “catch-up” contributions to both your retirement plan and IRAs. For 401(k)s (not including SIMPLE plans), the catch-up amount for 2014 is $5,500 above the contribution limits and adjusted for inflation in subsequent years. For Traditional and Roth IRAs, the catch-up amount is $1,000 above the standard limits, which are now annually adjusted for inflation.
- Increase the amount you’re already contributing to take full advantage of these catch-up opportunities.
- Find out how long your savings could last with our easy-to-use Retirement Quick View Calculator.
- Don’t assume your current contributions are enough
- Depending on your retirement goals and how much you have saved already, you may need to be saving more than 20% of your income while in your 50s.
- Retirement plan and IRA contribution limits could mean you need to save extra in taxable accounts like a brokerage account.
- Avoid taking early cash distributions, even if you change jobs
- Be aware that withdrawing cash from your retirement accounts before age 55 or 59 ½ (depending on the plan) can carry not only high taxes, but also early withdrawal penalties
- Consider adding bonuses, tax refunds, or other lump-sum payments to your retirement savings
- Maintain your emergency fund to cover at least three to six months of living expenses.
2. Review and update your retirement plan
- Are you on track to reach your retirement goals? Make sure you know how much you should be saving.
- Ensure your investment and asset allocation strategy is aligned with your goals.
- Consolidate your accounts from previous employers’ retirement plans into your current employer’s retirement plan or an IRA to help you better manage your finances.
3. Protect yourself from the unexpected
- Consider additional life insurance protection to provide for loved ones.
- Learn about long-term care insurance.
- Protect what might be your most important retirement asset – your home. Make sure your home is sufficiently covered with homeowner’s insurance.
4. Develop your income plan
In your 50s, you can be more realistic about when you want to retire, how much income you’ll need, and what your current retirement savings are projected to be once you reach retirement age.
- Identify your sources of income for retirement.
- Assess what your monthly expenses will be.
- Understand the risks. For example:
- Do you know how longevity can impact your plan?
- Have you planned for healthcare?
- How will inflation impact your portfolio?
- Create a withdrawal strategy that’s right for you.
- Understand the role guaranteed income with annuities can play in helping you meet essential expenses in retirement.
Recordkeeping, trustee and/or custody services are provided by Wells Fargo Institutional Retirement and Trust, a business unit of Wells Fargo Bank, N.A. This information is for educational purposes only and does not constitute investment, financial, tax or legal advice. Please contact your investment, financial, tax or legal advisor regarding your specific needs and situation.