When you reach your 50s, retirement is no longer so far off. It's right around the corner, and there's no time to waste. Just as there are at every stage of life, your 50s bring certain steps you should take to begin preparing for retirement. Here are a few things you should be thinking about.
Evaluate your retirement savings. Retirement savings should be at the top of your priority list. Questions you should be asking yourself include the following: How much do you have saved? Do you have enough? Do you need to save more? What are your options?
Higher income equals higher taxes. Many people experience their highest level of income during their 50s. Earning more leaves you exposed to more taxes. A financial professional can assist you in ways to reduce the burden of taxes, allowing you to save more for your retirement years.
Take advantage of employer matching. If you're saving through a company retirement plan and your employer offers matching, this is the time you want to make sure you're taking advantage of that full potential. In addition to employer matching, this is also the time you should be maxing out your retirement accounts and saving as much as possible. If you're already maxing out your existing retirement accounts and have the desire and means to save more, you always have the option of opening additional accounts.
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Catch-up contributions. Life has a tendency to throw us curves and make us rearrange our priorities. If life has gotten in the way and you've fallen behind with your retirement savings, individuals over the age of 50 have the opportunity to make catch-up contributions to compensate for missed contributions in prior years. Different types of retirement accounts have different catch-up contribution amounts.
Evaluate your expenses. As stated before, this is the time you should be making catch-up contributions, not slacking on your saving efforts. It is more important now than ever before to not let expenses get in the way of your retirement. Budgeting is a great way to get a feel of where your finances are and keep them on track.
Evaluate each of your expenses and determine if any of them can be eliminated or reduced. A newer trend altering retirement savings is the increased amount of adult children moving back home. Be sure to evaluate who you are supporting and how long you plan to do so. Supporting others before and during retirement is fine if you've planned for it.
Although it seems expenses just accumulate as the years go on, it is crucial to continue saving the amount that will deliver you a comfortable retirement. Create a budget or speak with a financial professional if you're in need of additional help.
The most important part of saving for retirement is making sure you're saving enough. In order to do this, you must have a clear idea of what you want your golden years to be like. Evaluate not only your basic needs but also all the things you'd like to do during retirement. Having a better picture of what you would like to accomplish will help you successfully save for the lifestyle you'd like to have during your retirement years.
(Editor's note: This guest column originally appeared on Investopedia.)
— By Jack Brkich III, president of JMB Financial Managers