At 50, many Americans are well established in their jobs, but it’s also an age when many of them also juggle several financial responsibilities: caring for their children while taking care of their aging parents and parents. ‘themselves.
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Ensuring they are on the right track to plan for retirement can sometimes take priority over their priorities. In turn, financial experts remind them that while there are no set rules, retirement isn’t that far off and there are steps they can take to plan for a comfortable after-work life.
“Retirement is not unique. We say personal finance is personal for a reason,” said Bobbi Rebell, founder of Financial Wellness Strategies and author of “Launching Financial Grownups: Live Your Richest Life by Helping Your (Almost) Adult Kids Be Everyday Money Smart.”
“That said, it may be a good idea to do some math with a financial adviser. Think about what your life will cost you when you retire and then you can get an idea of what you will need to fund that life. Be sure to factor in inflation and a realistic rate of return on your investments. »
Check where you are on your timeline
At age 50, ideally, you are well on your way to reaching your retirement savings goal; if not, this age is a great time to wake up, as many of us often still have a few decades left to contribute and grow our investments, Rebell said.
Not enough? Make reasonable and realistic adjustments to your savings and investments. Still not enough? Get comfortable with course correction, she says.
“We are often exposed to ambitious images of what our retirement should look like by companies that have a vested interest in having us work with them,” she said. “It can be a great source of motivation. But it can also be disheartening if we don’t meet the expectations we see in the media and that our friends and family tell us about.
“Conclusion: measure your investments against your own realistic goals and aspirations, not against your friends and family, and certainly not against the aspirational images on social media and anyone trying to sell you something.”
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Start with some questions and assessments
At 50, you’re 17 years away from “official” retirement and some professionals are even working later, which is a solid lead for impacting your retirement, according to some experts.
“It starts with a goal and an assessment of what you can do,” said Tatiana Tsoir, CPA, business expert and founder of The Bold Blog. “Ask yourself these questions.”
First, when do you plan to retire? “A lot of people know – just based on what they’re doing at 40-50 – that they already have confidence in their careers and know where it’s usually going,” she said. “So if we take 67 as an arbitrary age, the next question is: what is your average life expectancy at 67? This number is arbitrary too, of course, but it gives a good idea of the target.
The next question: “How much money do you need per year, after taxes, to live comfortably in retirement?”
Tsoir said, “It will take a bit of math depending on whether or not your home is paid off, whether you have debt, whether you have full Medicare coverage and/or supplements.”
Save six times your income at age 50
Rita Assaf, vice president of retirement products at Fidelity Investments, explained that Fidelity suggests aiming to save at least 15% of your pre-tax income each year, including any employer correspondence, in an effort to save 10 times your pre-retirement income in 67 years.
“To achieve this goal usually means aiming to save six times your income within 50 years,” Assaf said. “Keep in mind that there are other factors that could affect this stage, such as when you plan to retire and the type of lifestyle you would like to have in retirement.”
In your 50s, she added, one of the best things you can do is take full advantage of catch-up contributions — every dollar counts.
Mitigate financial risks as you approach retirement
Another important step at age 50 is to make sure your asset allocation matches your risk tolerance and is appropriate for your age group or time horizon.
For example, investing in a target date fund or managed account can provide greater peace of mind during periods of volatility, according to Assaf.
Remember to diversify, as exposure to different segments of the markets – US small and large caps, international equities, investment grade bonds, etc. – can help balance your overall portfolio risk against your age and goals. , she added.
Finally, don’t be afraid to rebalance your portfolio. “Avoid portfolio drift, which can happen during bull markets when stocks rise and your asset allocation becomes unbalanced,” Assaf said.
As always, she added, it can be helpful to meet with a financial advisor to review your goals, do some scenario planning, and hopefully gain some peace of mind.
Be debt free and plan your healthcare expenses
According to Jay Zigmont, Ph.D., Certified Financial Planner and Founder of Childfree Wealth, there are two things most people should be aiming for by the time they hit 50. First, having no debt – anything but a mortgage – and second, having a plan in place for long-term care.
“Being debt-free lays the groundwork so that all of your extra income can be spent on saving and investing,” Zigmont said. “Long term care is often overlooked, but your 40s may be the cheapest time to buy a long term care insurance policy. If you don’t want to buy a long term care insurance policy, make sure you have a plan that includes a set aside amount to plan for it.
Andrew Latham, Certified Financial Planner and Chief Content Officer of SuperMoney.com, echoed that sentiment, noting that healthcare expenses can be a significant financial burden during retirement.
“As you approach 50, start thinking about your health care needs and explore options such as long-term care insurance or health savings accounts (HSAs) to help cover the potential medical costs,” Latham said. “Including healthcare expenses in your retirement savings plan is crucial to maintaining financial security in your years to come. »
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This article originally appeared on GOBankingRates.com: Experts: This is what your retirement savings should look like at age 50