How to save for retirement in your 40s, 50s, and 60s

How To Save For Retirement When You Are In Your 50s |

How to save for retirement in your 40s, 50s, and 60s

The 50s are crunch time for saving for retirement. If you set a retirement savings target but have been neglecting it, you need to dust it off for a careful review.

“You should be looking at your plan periodically, at least every three years,” says retired certified financial planner Dick Bellmer, a past president of the National Association of Personal Financial Advisors.

Once you’ve reacquainted yourself with the financial destination you want to reach, take these steps in your remaining pre-retirement years to make sure you get there.

First item for consideration: your savings and investments thus far. Hopefully, you’ve been stashing away money consistently, making maximum contributions to 401(k) plans and IRAs, as well as other accounts.

How much is enough? That depends on your lifestyle and expenses, potential medical bills and the kind of support you’ll have from, say, a pension plan and Social Security.

As you review your savings goals, be careful not to set the bar too low. Use a retirement calculator to get a better idea of how much you might need to save.

If you need some assistance, call in the experts. Consider meeting with a fee-only financial adviser who can make sure you’re on the right track.

2. Tackle debt

One thing that can keep you from saving for retirement is lingering debt. By the time you’re 50, one big debt hurdle you may have left to clear is your mortgage.

Once upon a time, mortgage-burning parties were a fun way to celebrate the achievement of owning your home free and clear. But that rite of passage is becoming less common. A 2017 study from Fannie Mae found that less than half of Americans between the ages of 60 and 70 have a mortgage when they retire.

Without a mortgage to pay for, you could focus on saving or investing in the stock market. Paying off your home will ly take time, but in the long run, it’s worth it.

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 (called catch-up contributions).

Younger workers can only contribute $19,500 to their 401(k)s and $6,000 to their IRAs in 2020. But Americans age 50 and up can contribute up to $26,000 in a 401(k) and up to $7,000 in an IRA.

An emergency situation may force you to dip into your retirement savings (especially if you haven’t set aside enough money for emergencies). Just keep in mind that tapping your 401(k) or IRA before age 59 1/2 will cost you. There are exceptions, but in most cases you’ll pay a 10 percent penalty for an early withdrawal.

4. Create a Health Savings Account

Another important step to take is preparing to cover unexpected medical costs. Large medical bills can quickly deplete a lifetime of savings.

A couple in their mid-60s will need $285,000 to cover health care costs in retirement, according to a 2019 Fidelity Investments estimate. Then there’s the stratospheric cost of extended care at nursing homes.

A report from Genworth says the median annual cost of a semi-private room in a nursing home was $89,292 in 2018. With that in mind, retirement planning must include some consideration of future medical costs.

One option is long-term health insurance, which pays for extended medical care, including such things as nursing and assisted living. If you qualify, you should also consider opening a health savings account. This will reduce your taxable income.

Your savings will grow tax-free and once you turn 65, you can make withdrawals without paying any penalties or taxes (savings are only taxed if use the money to pay for anything besides qualified medical expenses).

Before choosing an account, you will want to shop around to find the best features for you, low fees or low minimum balance requirements.

5. Make the most of Social Security

The earliest you can start taking Social Security is technically age 62. But at 50, it doesn’t hurt to start thinking about your plan for collecting benefits. You can use Bankrate’s Social Security calculator to estimate your benefits.

Experts say most people take Social Security too early. That’s a mistake. Delaying retirement doesn’t just give you the potential to earn more. It also affects the size of your monthly benefit checks. Elijah Kovar, co-founder of Great Waters Financial in Minneapolis, says that by drawing Social Security at 70 instead of age 62, your monthly benefit amount rises by about 76 percent.

Waiting to collect Social Security, Kovar says, is also a good idea if you’re married and you earn more money. If one spouse outlives the other, the surviving spouse keeps the larger Social Security benefit. By having the higher earner wait to claim their benefits, you’ll have a bigger pot to pull from in retirement.

Another important consideration when deciding when to take Social Security is your tax situation. Kovar says from a tax standpoint, it’s the best source of income we have outside of Roth IRAs. Maximizing your Social Security benefit also comes down to implementing strategies that will lower the amount of income that’s subject to taxation, donating assets to charity.

6. Generate income beyond investing

Your investments are ly a stream of income you plan to use in retirement. Besides your portfolio and retirement savings, however, you should think of other ways to increase your earnings, getting a side hustle.

A 2018 Bankrate survey found that 37 percent of Americans have a side job. Freelancing or serving as a consultant can provide additional earnings if you’re behind when it comes to saving for retirement. And it’s less risky than alternative routes buying an annuity.

This article was updated in November 2020 to account for contribution limit changes.

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How to save for retirement in your 40s

How to save for retirement in your 40s, 50s, and 60s

Let’s start with the good news: studies1 show that your income peaks between the ages of 45 and 54. You’ll potentially have more money than ever – but you may also have unexpected or unwelcome expenses, divorce2.

At this age you might also put retirement planning on the backburner in favour of more pressing financial commitments, such as your mortgage and kids’ school fees.

Use these potential life changes as the impetus to re-evaluate your assets and income, and look at how you can maximise savings for your retirement.

In your 40s, retirement age is still some 20 years away and, while that seems plenty of time, your decisions now can help secure your financial future. Read on to find out how to save for retirement in your 40s.

Keep tabs on how much you’re ly to need in retirement by checking the retirement standards published quarterly by the Association of Superannuation Funds of Australia (ASFA). Calculate this against your own super balance to give you an idea of how soon you’ll be able to say goodbye to the 9 to 5.

According to the Association of Superannuation Funds of Australia, by the time you reach 49 you’ll have between around $87,500 and $145,0003 in your super account.

The same group estimates singles will need retirement savings of $545,000 for a comfortable retirement, while couples will need combined retirement savings of $640,0004.

Are you on track to getting there in the next couple of decades?

Set realistic financial goals

While your financial goals in your 20s and 30s may have been idealistic, as you get closer to retirement they should become realistic. It’s time to develop a clear plan for your savings, with achievable short, mid and long-term targets in working towards your overall retirement goal.

Live within your means

Your 40s are typically peak earning years, but with Australia in the grips of a recession, many things aren’t typical right now. One thing that’s changed is where we do our work. At the start of the coronavirus epidemic, more than 10.

5 million Aussies swiftly transitioned to working from home5, and many people are yet to go back to the workplace. While there might have been some initial expenses to set up a suitable home workspace, there’s also a reduction in day-to-day costs commuting.

Consider funnelling any of this cash into your savings instead, to actively save for your retirement in your 40s.

Become more mindful around spending on big-ticket items as well – before a splurge, try taking a day (or a week) to give yourself time to think about how much you really need the item. You’ll be surprised at how often you decide it’s not essential to your life, and the money you save can be added to your retirement savings instead.

Review your investments

Your super might be ticking along, but what about other investments? It’s not too late to start saving and investing. Work out what style of investor you are so you have a better understanding of how comfortable you are with risk. Then talk to a financial adviser about creating a portfolio that suits you, which might include property, shares and other investment classes.

Aim to be debt free

Entering retirement with debt means juggling repayments with a high interest rate, which will eat into your retirement income.

To enter retirement debt free, look at paying off your home loan before you retire. Preparing for retirement in your 40s might mean getting a better deal on interest rates or creating a budget that allows you to make extra contributions to your mortgage, above your minimum monthly repayments.

Make sure you pay off your credit card balance in full each month so you don’t accumulate interest. Be cautious about borrowing money that you won’t be able to pay off in a short period of time.

Update your insurance

For many people, COVID-19 has been a strong reminder of how much we value good health and wellbeing – and how quickly things can change. Having the right kind of insurance can help create peace of mind when you need it.

Review your private health insurance to make sure it’s still right for your needs, particularly if your circumstances have changed or you have a growing family. Income protection and life insurance help to protect you and your family if you can’t work due to injury or illness, so you can continue to pay the bills without dipping into your savings.

Plan for your kids’ futures

Your kids mean the world to you – we get it. But their education doesn’t have to come at the expense of your retirement. As part of your retirement planning, consider setting up a separate savings account to fund things your kids’ school and university fees, so you don’t have to dip into your retirement fund for their education.

Show your children how and why you’re cutting back on discretionary spending (meals out, trips to the movies) to make their long-term goals ( getting a job) a priority. You’re never too young to develop a healthy understanding of finances and budgeting.

1 Australian Bureau of Statistics (2018), Employee Earnings and Hours (All employees, average weekly total cash earnings, number of employees – age category, May 2018)
2 Australian Bureau of Statistics (2019), Marriages and Divorces, Australia 2018
3 Association of Superannuation Funds of Australia (2017), Superannuation Account Balances by Age and Gender
4 Association of Superannuation Funds Australia (2018), ASFA Retirement Standard
5 Roy Morgan, Hard To Switch Off Work For Many Australians Working From Home


11 financial strategies for your 40s, 50s and 60s

How to save for retirement in your 40s, 50s, and 60s

No matter what your age is, stress about finances can take its toll. Even if you’re in a comfortable place with your money, you should still think about things superannuation, mortgage repayments, and what your retirement will look .

The recent Real Concerns Index found that finance was one of the areas attracting the greatest concern for people over 55 (with 53.9% of respondents saying their current financial situation worried them). Isn’t it time you put those fears to bed? Checking off these financial goals for your 40s, 50s and 60s can help you prepare for the best possible future.

Remember it’s important to seek out your own financial advice, and the tips below are general in nature, so you’ll have to do your own research too.

Everyone’s circumstances are different, and what you need to do to secure your financial future will vary depending on your situation.

But it’s great to start thinking about your financial future, as this will set you up for a better result than if you ignore financial worries.

So, here are a few ideas on how to set financial goals, your age group and possible needs.

What you can do in your 40s to help set yourself up for future financial success

They say life begins at 40, so now may be the time to start paving the way for a financially successful future. These four tips can help you set up good habits:

  • Research insurance options: When it comes to underwritten life insurance products, the sooner you get the right insurance the better. Why? Because as you age and experience health issues, the lihood increases that your insurer may apply a loading or special exclusion to your policy, or you may even find that some insurers will decline to offer you cover.
  • Set savings rules to help you reach your retirement goal sooner: Depending on your circumstances, it may be helpful to speak with your financial adviser about a strategy for bucketing your income into expenses, short-term savings and long-term savings so you can put a percentage of your income into your retirement savings fund.
  • Pay down your debts: With the cost of living always on the rise, it’s important to reduce your household debt wherever possible. As Professor Pasquale Sgro from Deakin University advises, if you’re only paying off the minimal amount of debt you could start drowning if interest rates suddenly go up.
  • Get the right super investment mix: What’s your risk appetite? Would a mix of high and low risk options help reach your goals? Speak to a financial adviser about how you can tweak your investment options to your advantage.

It may be time to put retirement saving strategies into practice in your 50s

When you hit your 50s, you’ll start thinking more about retiring, (even though the Australian government’s workforce guidelines currently require employment to the age of 66-67 before you can claim the Age Pension (if you’re eligible). So, if you’re keen on having a comfortable retirement, it could be a good time to take care of these three key things:

  • Make last-minute adjustments to your super: You need to have enough super to provide you with many comfortable years, so consider making some last-minute changes topping up with pre-tax contributions, or even downsizing your home and investing the proceeds of the sale directly into your super. You might also want to change your investment options to a low-risk strategy and consider additional streams of super funding such as transition-to-retirement and spousal super contributions.
  • Cut costs where you can: Do you still need two or more cars? Could you save a few extra dollars each week by doing one big shop instead of buying meals every day? Think about where you can cut costs and invest any extra cash into your savings. A good place to start is by creating a budget for your family’s finances.
  • Don’t let boomerang kids or caring for older parents derail your savings plan: We’re seeing more boomerang kids these days, and plenty of Aussies also have to look after ageing parents when they are in their 50s. But that doesn’t mean you should stop saving for your own retirement. Stick to your savings strategy and speak to a financial expert for some new strategies if you’re struggling.

Prepare for retirement in your 60s by ticking these financial boxes

Those long days at work will soon be coming to an end, but don’t get complacent! Now is the most important time to sort out your retirement plan and save as much as possible for your more comfortable years.

  • Zero in on a retirement plan: Your best years are almost here, so it’s time to nail down your retirement plan.
  • Review your funeral insurance plan: Getting the right funeral insurance can assist your loved ones in dealing with the stress of expensive funeral costs at a time when they are already grieving.
  • Do you need to downsize? A smaller home could actually be ideal in your 60s especially in a great location that’s close to all the best amenities for your retirement.
  • Plan your legacy: What sort of legacy do you want to leave for younger generations? It’s not always nice to think about your passing and how you will be remembered, but it is important to make a plan. Use this time to finalise your will.

Planning for the future doesn’t happen overnight. That’s why it’s recommended you spend your 40s, 50s and 60s checking off these financial must-dos so you can enjoy a more comfortable retirement.

While it’s important to focus on family finances, super and savings when planning for the future, you’ll also want to think about what will happen after you pass away. Planning ahead with a funeral insurance policy can reduce the financial burden on your loved ones when they are focusing on more important things. Request a no obligation funeral insurance quote from Real Insurance today.


Retirement prep in your 40s and 50s

How to save for retirement in your 40s, 50s, and 60s

Your 40s and 50s are a good time to get serious about deciding how you want to live once you retire and take inventory of your financial situation. As you gear up to retire, you want to consider:

  • The current mix of investments in your portfolio
  • Your current assets
  • Your anticipated future assets vs. income
  • When you want to start receiving Social Security
  • How you’ll pay for health care costs
  • The tax impact of drawing down your assets over time

Are you on track to retire when and how you want? If not, you have time to catch up where you need to. Let’s explore how you can form a solid financial strategy for your life in retirement — and other important considerations before you transition into your retirement years.

How will you spend your time in retirement?

How you plan to spend your time can have a big impact on your retirement finances. You’ve probably already been throwing around some ideas, but now is the time to start nailing down your picture for retirement.

What kind of lifestyle do you want? Whether you want to spend your summers fishing or take an annual trip to Jamaica, it’s time to brainstorm. You may not know all the answers, but you can revisit them over time to fill in the blanks.

Below are four key questions you should be asking yourself — to help you be retirement ready:

1. What do you plan to do with your time in retirement?

Retirement can be a fulfilling time devoted to your passions and other pursuits, volunteering. What will an average day look for you? Travel and hobbies can be expensive. You’ll need to make sure you have enough income to support the lifestyle you want. And with inflation, basic living costs will ly cost more.

2. Will you work in retirement?

For many, retirement may not be a distinct point between working and not working. Maybe you the sense of purpose and social interaction that comes with working. You could be thinking about working part-time and transitioning into retirement. How long will this income last?

3. Who will depend on you for personal and financial support?

If you have adult children or grandchildren, you need to consider how they may rely on you financially. Are you caring for an aging parent right now — or could in the future? This can affect your financial situation. Explore the costs of that support in time and dollars and factor that into your retirement plan.

4. Where will you live once retired?

Where you live in retirement affects your income — and your emotional, social and physical well-being. Will you stay put? Move closer to family? Downsize? Be sure to research how income taxes where you plan to live could affect you. Consider how your location and living situation needs to adapt to your needs as you age. For example, should you opt for a single-level home?

How much income will you have in retirement?

Social Security should account for less than half of your future income, so your retirement and/or pension plan and savings will need to make up the rest.

  • Have you checked your 401(k) account balance lately?
  • What is your latest Social Security estimate?
  • Don’t forget about inflation in your retirement income strategy. The average inflation rate has been about three percent. 

Now is the perfect time to gauge whether you’re on track to have enough income to support your retirement lifestyle.

You’ll want to calculate your potential retirement income needs, with your retirement goals in mind, to determine how much to save annually.

What if you started for retirement saving late?

Maybe you just haven’t been able to save much up to this point. The good news is it’s never too late to start! Consider investing the maximum amount in your 401(k) — either pre-tax or after tax. Also:

  • Think about opening a Traditional or Roth IRA.
  • Pay attention to the amount of debt you take on and pay off before retirement if possible.
  • Consider whether you need the help of a financial professional.
  • Consider diversifying your assets.
  • And don’t take on additional risk to make up for lost time. The key is to start, and you can step up your savings over time — it can really pay off. If you’re not where you need to be financially right now, don’t worry. You still have time to make adjustments.

What else can you do to prepare for retirement?

Here are three steps you can take to gauge where you are financially right now, and plan for where you want to be in retirement:

  • Meet with a financial professional to:
    • Assess your investment portfolio your age, risk tolerance and objectives
    • Review where you’re at financially and make appropriate decisions that
  • Think about your long-term health
    • Stay healthy by eating right and getting regular exercise
    • Look into potential long-term care insurance options
  • Be smart with your money
    • If you have any extra income, direct that money to your savings if you can
    • Before you buy that cabin, consider any implications a major purchase may make on your retirement plans


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