While 50 may be the new 40 in terms of lifestyle, vitality and longevity, it’s important to take a more earnest and pragmatic approach toward your long-term financial health than you may have in your 40s. Retirement may have felt far away a decade ago, but now it’s approaching rapidly. Many people in their 50s also feel the financial pressure of being part of the “sandwich generation,” a growing group of individuals who simultaneously support their adult children and aging parents in addition to saving for their own financial goals. Here are a few financial tips for people who are in their 50s.
1. Organize your financial priorities. At this point, saving aggressively for retirement should be at the top of your list. You likely still have other financial obligations, but it is critical that you don’t put retirement on the back burner. Try to find a balance between funding your family members’ needs – like college or assisted living expenses – and your personal savings. These decisions are often difficult, and may seem overwhelming, but having a written financial plan with guidelines for you and your family can help make them easier.
2. Kick your savings into high gear. If you’re already saving for retirement but have the ability to increase the amount you’re contributing to your 401(k) or IRA – do it! Know the maximum contribution you’re allowed to make each year, adjust what you’re saving accordingly and ensure you’re taking full advantage of your company’s matching program. If your savings are lacking, don’t panic, but recognize that you might have some catching up to do. The good news is, after age 50 you can make catch-up contributions to most retirement plans.
3. Calculate what you’ll need for retirement. Set aside some time to determine the expenses you’ll likely incur during retirement. Keep in mind that the financial impact of healthcare costs and long-term care can be sizable – and that with the average lifespan increasing, you may need to rely on your retirement savings for 30 year or longer. Though they shouldn’t replace the advice of a professional advisor, online resources like a retirement savings calculator can provide a baseline to get you started.
4. Be realistic. Retirement may be a possibility for you within five or 10 years, or it could be more distant. Regardless, now is the time to evaluate what you will spend your money on once you’ve retired and to discuss your retirement plans with your family. If you have a spouse or significant other, set goals together and make sure your plans are aligned. Consider where you might live, whether you plan to travel or work part-time. If you find that your retirement expenses are largely out of reach, adjust your savings, or make some decisions about how you’ll prioritize your goals.
5. Anticipate bumps in the road. Your role as a parent and a child is never ending, but as your family grows and changes, so should the level of financial support you provide. Have candid conversations with any family member you’re supporting financially and set realistic expectations. If your adult children or aging parents need help making healthy money decisions, provide advice but resist opening your pocketbook if it will put your own financial security in jeopardy. Also, be prepared for changes that may impact your plans, such as an early retirement offer or unexpected illness. While these can be difficult to prepare for, thinking through a variety of scenarios and establishing contingency plans can help ensure you’re financially secure in any situation.
There are many milestones you might encounter during your 50s, like becoming an empty-nester, a grandparent or dealing with the death of a parent – and all these things may have an impact on your finances. If you haven’t already started working with a financial advisor, consider doing so. A professional can help you navigate the complexities of estimating what you’ll need in the years to come, and help you organize, plan and save – regardless of what might come your way.