You’ve made it to 50—Congratulations! That’s quite a milestone. As with any milestone, turning 50 is a good time to look back and reflect on the path your life has taken—both the good and the… not so good. But just as important, perhaps even more so than looking back, hitting the 50 mark is a great time to look forward to what lies ahead as you plan the next stages of your life, including your retirement.
Perhaps you have been a dedicated saver for your entire career. If that’s the case, good for you! However, even the best savers can do more to ensure their retirement is secure.
Even if you are late to retirement planning because of other needs that took priority and you just haven’t had the chance to save, it’s not too late to start. However, at age 50, most people are just 15 years or so away from leaving the workplace which leaves a relatively short amount of time to save for retirement.
The most important thing you can do at age 50 to achieve your retirement goals is to participate in your employer’s 401(k) or 403(b) plan. Funds are taken out pre-tax, and if your employer matches contributions, that’s free money for you; money you are leaving on the table if you don’t participate. If you are able, maximize your contributions each year. This is one of the easiest steps to take to help increase the amount of money you’re saving. For tax year 2020, the maximum contributions to 401(k)/403(b) plans is $19,500, while the combined employer and employee contribution is $57,000.
Take Advantage of Catch-Up Contributions
If you didn’t make saving for retirement a priority early in life, it’s not too late to catch up. At age 50, you can start making extra contributions to your tax-sheltered retirement accounts. For tax year 2020, you can make up to $6,500 in “catch-up contributions.”
Once you have established your savings plan, here are some other tips to help you reach your retirement goals:
- Set realistic goals. Ask yourself if your goals are realistic based on what you have saved and your expected Social Security benefits. How much is enough? That depends on your lifestyle and expenses, potential medical bills and the support you’ll have from a pension plan and Social Security. Use a retirement calculator like the one found on the Retirement Resources and Tools page of cbservices.org to get a better idea of how much you might need.
- Eliminate debt. Lingering debt can keep you from saving for retirement. Develop an action plan to eliminate credit card bills and other expenses weighing you down. Pay off your high-interest consumer debt and do your best not to accumulate more. Use and pay off your credit cards every month.
- Re-evaluate your budget. Think of a budget as a “scorecard” to tell you if you are living within your means. If you don’t have any extra money to apply toward your retirement savings or debts, you can’t address either. Look at your monthly expenses and determine if you are getting the value you need from all of your discretionary purchases. Then decide whether you would rather spend now or save for later.
Key Dates after age 50
Turning 50 is the start of a series of key dates in retirement planning. Here are some others:
Age 55: If you are already retired, you can now withdraw funds from your 401k/403(b) without incurring the usual 10% penalty. Please note, if you are still an active employee at age 55, you will incur the 10% penalty. At 55, you also can contribute an additional $1,000 into your health savings account (HSA), if you qualify and have a high deductible health insurance plan. The cap is $3,550 in 2021 for an individual health savings account and $7,100 for a family HSA.
Age 59½: You may withdraw money from your IRA pension program without paying an additional 10% penalty. While the penalty disappears after 59½ 1/2, 401k/403(b) participants will still be liable for the income taxes, and could miss out on years of compounding interest if withdrawals are made.
Age 60: You can collect survivor benefits on a deceased spouse’s Social Security.
Age 62: You can access Social Security at this age, however, you are only entitled to full benefits when you reach your full retirement age. If you delay taking your benefits until your full retirement age your benefit amount will increase, up until you reach age 70. Find your full retirement age at the Social Security Administration website.
Age 65: You are now eligible for Medicare.
*Please consult your financial adviser before you make any changes or withdrawals to your retirement plans.
Turning 50 is a wonderful milestone. Sound and thoughtful planning will help you reach your retirement goals. Christian Brothers Retirement Planning Services has Retirement Planning Guides, a Retirement Planning Handbook and a Guide to Retirement Video available to help you keep your retirement plans on schedule.