For many years, the goal of retirement in your financial plan seemed like a distant dream. As you transition from your 40’s into your 50’s, the dream becomes more of a reality. Baby boomers have faced many challenges along the road to retirement: from corporations switching from a traditional pension system to 401(k)’s to experiencing one of the worst financial melt downs in our country’s history, which left many Americans starting over. This is the perfect time to analyze your current financial situation and see what steps you can take in order to retire the way you have always wanted. Here is a financial planning to-do list to consider while getting closer to retirement:
1. Budget & Determine What Lifestyle You Want.
It all starts with a budget. Making the transition from getting a steady income to living off a more limited fixed income can become tricky if you do not plan for the change. Start with a simple budget of your monthly expense to get an idea how much income you'll need to replace. There is a lot of factors to take into consideration to determine what kind of lifestyle you want for your retirement. Are you willing/wanting to relocate? Will you be debt-free when the time comes? How much are you willing to support your children? Have you thought about downsizing? All these decisions will have a huge effect on you and your plans in retirement.
2. How Much are You Contributing to Your Retirement Accounts?
Many people in their 50’s earn the highest incomes of their careers during this period of their life. It is crucial to make sure you are utilizing and maximizing all your retirement accounts available. After you turn 50 you can make larger contributions towards your retirement accounts. The IRS allows you to contribute up to an additional $6,000 to your 401(k), 403(b) or 457 plans. As well as an additional $1,000 toward your Traditional IRA or Roth IRA. Check out the limits HERE.
3. Check with Social Security
One of the most important retirement decisions you will make is when to start taking your social security benefits. There is a number of strategic ways to maximize your benefits depending on your situation. You can get your statement and check your benefit HERE. This is a great time to get together with a financial planner to customize it to fit your needs.
4. Gather All Retirement Accounts and Consolidate
Nowadays, it is common for someone to have multiple jobs over their lifetime with old retirement accounts spread out with their former employers. Use this opportunity to take out all those old files you have and make sure you have a list of your old 401(k) accounts and IRA’s. This is a great time to also consider consolidating accounts to make organizing your finances simpler and to make sure your investments are being properly invested for your time horizon.
5. Long-Term Care Insurance
Long-term care costs can be a significant drain on your retirement. The last thing you want to do is build up your assets over many years, only to see them deplete in a matter of months from an unforeseen accident. Long-term-care insurance could prevent this from happening, but make sure it fits your budget. There are many items you will want to consider before purchasing a long term care product. Please consult a financial planner to help you with this.
A successful retirement takes strategic planning and your 50’s is crucial time to help ensure you are on the right path to get there. Use this time to develop the kind of lifestyle you want to support and how much your financial resource will allow you to do that. Look to make sure all your assets are working hard for you including retirement accounts, investment accounts, pensions and social security. If you have not reviewed your plan in a while or need help building a customized plan, there is never a better time than now to reach out to a financial planner for assistance.
By Nicholas Licouris
Investor Advisor Representative
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.
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