While it is important to have a retirement savings strategy in place throughout adulthood, your 50s is a time when retirement planning becomes even more critical.
After all, retirement is right around the corner.
Having the right financial roadmap in place can ensure your transition into retirement goes according to plan. Plus, staying on track of your finances in your 50s can help reduce stress and allow you actually enjoy the years ahead.
Fortunately, there are several money moves you can make in your 50s to ensure a smooth transition into retirement and to reduce financial stressors.
1. Pay Off Remaining Debt
Once you’re retired, debt interest payments can really cut into the limited amount of monthly income you receive. Therefore, aggressively paying off any outstanding debt in your 50s is an incredibly important goal.
Implementing savings hacks into everyday life can be a great way to increase your savings rate so you can quickly pay off non-mortgage debt like credit card bills or auto loans.
Limiting your spending, cutting out useless monthly subscriptions, and leading a more minimalist lifestyle are just a few ideas you can use to save more money. You can also try a variety of budgeting and cost-cutting apps to monitor your spending habits and to find new ways to save money.
Additionally, you can turn to plans like the debt snowball method to gradually target your smallest debt payments and accelerate the rate at which you become debt free. This strategy is a powerful way to get started on your debt free journey, and your retirement income will thank you for getting rid of any outstanding debt in your 50s.
2. Catch Up On Retirement Savings
If you have neglected to save for retirement earlier on in life, do not panic: there is still time to catch up. It’s going to require more work and dedication than if you had started as a young adult, but it is possible to jumpstart your retirement savings if you’re playing from behind.
Outside of paying off debt, it is important to set savings targets that account for how much money you will need during retirement. Figuring out the type of lifestyle you want during retirement and how much money that lifestyle will require is a great place to start.
Consider expenses like monthly necessities, travel plans, future medical bills, and how much support you will have in your later years from family.
Just be careful to not set the bar too low. It’s better to aim high and to come out ahead than to realize you haven’t saved enough for retirement when you’re already out of the workforce. If you need professional help, don’t be afraid to seek out guidance from an experienced third party such as a certified financial planner.
You can also use catch-up contributions throughout your 50s as a tool to accelerate saving. Anyone over the age of 50 can add an extra $6,000 per year to their 401(k) and an extra $1,000 per year to their IRA, so don’t neglect these opportunities if you can afford to save more.
Finally, you can also consider working to increase your income during your 50s to help save enough for retirement. This could mean finding a side job, working more hours, or pushing hard for a promotion at work. While this isn’t always the ideal solution for catching up on retirement savings, it is an option if you’re in a tough financial situation.
3. Consider Downsizing
With a decreased income and the potential for more expensive medical bills, retirement years can carry a hefty price tag.
Ideally, your retirement savings plan will have factored in these sorts of financial changes, leaving you prepared. However, if you want to ensure that you have enough savings to cover the high costs of retirement, you can also consider downsizing.
Downsizing is a common strategy for older homeowners, and it is something you may want to factor in for your retirement savings plan when setting a savings target.
Larger homes can be overwhelming and unnecessary for older homeowners, and downsizing to simplify life while cutting costs is a growing trend.
Larger homes also come with higher property taxes and monthly utility bills, and repairs can be more expensive as well. If you aren’t using a large portion of your home, downsizing might be a sensible way to cut down on homeownership costs.
There are also other frugal options you can use to simplify your life as you prepare for retirement. Many older couples find that having one vehicle is enough as they approach the end of the careers, and this can be a simple way to cut down on annual car expenses.
As long as you can reduce costs through downsizing while still enjoying your lifestyle, this is an effective money move you can use to prepare for the high costs that often come with retirement.