By the time you hit your 50s, you’ve likely earned more wisdom, self-confidence, and money than ever before. Your financial situation is probably more stable than when you were younger, and hopefully, you’re enjoying some of the fruits of your labor. As you look toward retirement, however, many financial rules change, so it’s important to understand them when preparing for the future. When you reach your 50s, you may want to add these seven financial tips to your budgeting repertoire.
1. Eliminate Debt and Create an Emergency Savings Account
Your savings may be your only source of income after you retire, so you’ll want to eliminate as much debt as possible. Try to pay off credit cards, car loans, and mortgages before you retire, and maintain an emergency savings account, which can help you deal with unexpected expenses.
2. Evaluate Your Investment Strategy
The closer you get to retirement, the more conservative your investments should become. You’ll want to ensure your investments will help you generate earnings and keep up with inflation. Inflation can reduce your purchasing power, so make sure your budget and your investment strategy can adjust for changing inflation rates.
3. Develop a Drawdown Strategy
You’ll have to withdraw money from your retirement account to fund your spending when you retire. If you have multiple accounts – an IRA, a 401(k), a pretax, and/or a Roth – you may want to seek counsel from a financial advisor on the best strategy to withdraw money. Different plans may have different withdrawal rules and tax implications, so consider speaking with a financial advisor to make the best decisions for your unique financial situation.
4. Assess Your Healthcare Expenses
Healthcare costs are a concern for many people during retirement, and for a good reason. The cost of healthcare may seem low today, but it increases as you age and require more or different types of care. So you should ensure that you can afford the care you need during the time of your life that you’ll probably need it the most.
5. Become Familiar with Social Security and Medicare
When you retire, you’ll need to know how much Social Security income you can expect. When you create an account on the Social Security website, you can see how much income to expect based on the date you plan to retire. You should also determine the extent to which Medicare will cover your healthcare expenses. It’s essential to sign up for Medicare as soon as you become eligible, even if you don’t need it yet, as you could face penalties if you don’t sign up by age 65.
6. Consolidate Retirement Accounts to Simplify Planning
Managing multiple 401(k) plans from former employers takes time, especially once you start withdrawing money from them in retirement. So make your life easier by consolidating them into one account before you retire. For help combining your retirement plans, talk to your current provider.
7. Visualize and Plan Your Retirement
When you retire, what do you want to do with your time? You must plan for your free time if you’re going to enjoy it. Still, 44% of participants in retirement plans don’t have a financial plan. Start by imagining what you want to do. Will you travel? Do you plan on spending more time with your grandkids? Are you interested in taking up a hobby or playing a sport? Your future budget should include careful consideration of your plans so you can make the most of your golden years.
Your 50s can be an exciting time. Planning is important at this stage, and considering the advice above along with the input of a financial planner can ensure you’re on the right track for a healthy financial future.