If you’re aiming to retire at the standard retirement age of 65, your 50s can feel like crunch time. Whether you’re falling behind or you’re pretty sure you’re on track, this is the decade to nail down exactly how much you need to save for the retirement lifestyle you want and exactly what it’s going to take over these next 10 to 15 years to get there.
At the same time, you might be part of the sandwich generation – those who have been stretched thin by the need to take care of both their aging parents and their older children, all while still trying to keep up with their own financial goals.
Suddenly, you hit 50 and realize the runway to retirement has gotten a lot shorter and you’re not sure if you’re anywhere close to where you should be at this point. If that sounds familiar, this checklist should help you get back on track.
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4 financial priorities for your 50s
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In your 50s, you have one major financial goal: get your retirement fully funded. With a few exceptions, anything else will take a back seat for this next decade. The question is less about what your financial priorities should be and more about building a personalized plan to get you where you want to be.
1. Come up with a realistic retirement number
When you first started putting away money in your 401k or other retirement accounts, you might have had a vague sense of how much money you needed to save up for your golden years. Now that those years are moving closer, it’s time to revisit your goal and, if it’s not already, make it more concrete.
You’ll find some rules of thumb around what percentage of your current salary you should plan to spend each year in retirement — like 70% or 80% of your pre-retirement income — in order to maintain your current lifestyle. And you might have an idea of your expected lifespan based on how long your parents or grandparents lived.
But in reality, the amount you should plan to have for retirement depends on so many different factors. Do you want to maintain your current lifestyle or do you want to do more, like travel or rent out your home and retire in an RV for a few years?
This answer can change how much you need to save. Do you have a lot put away already or have you only just started to really save seriously for retirement? This answer can change how much you can realistically save (or what age you can realistically retire). Do you want to hang up your boots right at 65 or do you plan to retire sooner (or later) than that?
The best way to find the magic number that fits your retirement goals and your current financial situation is to meet with a financial planner. More than any online calculator or broad rules of thumb, a professional financial planner can talk through your finances with you and help you create a personalized plan to get you from wherever you are today to where you want to be when you retire.
Use the Bankrate tool below to connect with a financial professional who can tailor a plan to help you reach your financial goals:
2. Start learning about social security, Medicare and other retirement benefits now
How much can you expect social security to contribute to your retirement income? How much will that number change depending on what age you begin claiming it? If you plan to, say, start a business or take a part time job to keep busy and pad your budget, how will working affect your benefits?
Navigating the paperwork and logistics of social security, Medicare or a pension (if you have one) can be complicated and you don’t want to wait until you actually need that income to figure it all out. If you haven’t spent much time learning about how it all works yet, here are a few resources to get you started:
These are all great things to discuss with a financial planner as well. But if you’re not ready to work with one just yet, take advantage of all the online resources you can right now to familiarize yourself with how it all works.
3. Aim to be debt-free by retirement
If you’re still wrestling with debt, the idea of putting anything extra toward retirement might seem impossible. In that situation, think of your debt payments as part of your retirement plan. If you tally up everything you’re spending now on your mortgage and other debts, that’s the amount you can subtract from your retirement budget – or redirect toward pursuing the hobbies and bucket list adventures you’re planning to do in retirement – once you’ve paid it all off.
Instead of feeling like those debt payments are holding you back, know that paying that debt down is just as important for your post-retirement future as contributing to your 401k is.
4. Prioritize your health now
A healthy retirement is just as important as a fully-funded one. Not only does physical health allow you to do more in retirement, it can also be a financial boost by lowering your future medical costs.
Work with your doctor to come up with a comprehensive and personalized diet and exercise plan so you can establish the right healthy habits now to slow the progression of conditions you might already have and prevent ones you don’t.
The changes you make now can have a big impact, even if you weren’t keeping up with regular exercise or a healthy diet before.
What to do if you’re behind on retirement savings
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By 55, the typical American has just $185,000 in retirement accounts, according to the Federal Reserve. That’s just over two years worth of the median income of $82,150 at that age. In other words, it’s not enough to retire on. If you’re in a similar situation and feel like you might never be able to retire, here are a few strategies that can help you catch up.
Max out every retirement account you can
Once you hit 50, the IRS allows you to contribute even more than the standard maximum contributions to your retirement funds. By age 60, you’ll enjoy super catch-up contributions to help you reach your goals even faster. All of these give you more wiggle room to catch up on your retirement savings if your fund isn’t where you want it to be right now.
Before contributing more beyond the tax-advantaged limits on your 401k and IRA, however, make sure you also contribute to your health savings account (HSA) if you have one. HSA contributions are tax-free when you contribute to the account and tax-free when you withdraw later — provided you use them for medical expenses.
By treating your HSA like an extra retirement account, you can build up a sort of separate healthcare fund so you’re not tapping your main retirement savings to pay for the medical expenses that inevitably come up as you age.
Be realistic about how much financial support you can provide others
As the sandwich generation, you love your kids and your parents. If you can afford to help out financially without sacrificing your retirement, that’s great. But right now, your top priority needs to be a fully funded retirement, so you may need to set some boundaries.
You can still provide support to your loved ones in other ways. For example, instead of handing your kids cash, consider letting them move back home so they can focus on saving up for their own goals without worrying about rent.
If your parents are struggling to make ends meet, you can help them navigate the paperwork and logistics of setting up the long-term care they need through Medicare or other resources rather than writing the checks yourself.
If you have debt, work on lowering your interest rates
Juggling debt and catch-up retirement savings at the same time can be exhausting and make you feel you’re not really making a lot of progress on either goal. To break through that plateau feeling, one of the most accessible tricks that many people overlook is lowering your interest rates.
Every percentage you can shave off that interest rate means more of each monthly payment is paying down the actual principal instead of being eaten up by interest.
Here are a few ways to lower your interest rates:
- Ask for lower rates. Yes, you can simply call up your credit card or loan provider and ask for a lower interest rate. Your chances of a yes are better if you have a good track record of on-time payments. But it doesn’t hurt to ask regardless of your payment history.
- Use 0% intro offers on credit cards. 0% introductory rates on new cards or balance transfer offers on your existing cards can be a useful way to build momentum on debt repayment. The key is limiting the amount to what you can pay off before the introductory rate expires — and making sure you don’t build up new debt now that the old debt is gone.
- Tap home equity to consolidate higher interest debt. By your 50s, you may have built up a healthy amount of home equity. Often, home equity loans can come with much better interest rates than you’ll find elsewhere. So, whether you’re battling credit card debt or a high interest auto loan, tapping some of that equity to consolidate that into a lower interest loan can help you pay down debt faster and pay less in interest overall.
These aren’t one-off tricks, either. You can repeat these strategies regularly as you chip away at your debt. When your 20% credit card debt is gone, for example, your 10% personal loan becomes the “high interest debt” that you can consolidate into either a better rate loan or a 0% introductory offer credit card.
Use the tool below, powered by Bankrate, to compare today’s top home equity offers:
Consider taking a side job
If you don’t think you’ll get anywhere close to your retirement goal with the amount you’re currently able to contribute, it might be worth taking on a flexible second job for the next few years to help you catch up. You can dump those entire paychecks into retirement savings or debt to build some strong momentum toward your financial goals.
This isn’t an option for everyone. But if you’re able to take on the added stress of a side job for a few years in your 50s, it might be the ticket that unlocks the retirement you’ve been dreaming about 10 to 15 years from now.
Create retirement back up plans
Depending on where your retirement savings are at right now, it can help to come up with a few different scenarios for what your retirement might look like. For example, maybe you don’t have the savings to fully retire at 65, but you have enough to cut back to part time work at that age for a few years to finish funding your retirement.
Maybe you’re only slightly behind and can pull it off if you just push your retirement age up to 67 instead of 65 — or maybe you can retire at 65, but only if you downsize your home and throw that extra equity into retirement.
There are a lot of different ways to retire, and no one size fits all. Even if your alternatives don’t sound quite as ideal as the retirement you envisioned, having those back-up plans can help you breathe easier. You’ll know that no matter what, you’ve got a plan in place.