Retirement Savings Tips by Age- In your 50s

The savings and investment decisions you make in the decades leading up to your retirement can have a big impact on your financial security in retirement. The following retirement tips are designed to help you make informed decisions. Of course, these tips are general in nature, so please seek personalized retirement planning advice from us regarding your specific situation.

Take advantage of catch-up contributions. Beginning the year you reach age 50, you can generally contribute additional amounts each year to your IRA and workplace retirement plan. These additional amounts are known as catch-up contributions, and they can help you do exactly that: catch up on your retirement savings if necessary.

For 2020, you may be able to contribute up to an additional $1,000 to your traditional or Roth IRA, $6,500 to your 401(k), 403(b), or 457 retirement plan, and $3,000 to your SIMPLE IRA.

And beginning the year you reach age 55, you can generally contribute up to an additional $1,000 per year to your health savings account.

Fine tune your financial plan. By the time you reach age 50, you may have a much clearer idea than when you first began saving of how much income you can expect from Social Security, pensions, your savings, and other sources of retirement income. Use this knowledge to fine-tune your financial plan. We can help you check whether you are on track to meet your income needs in retirement, as well as help you adjust your financial plan if changes are needed. Checking your progress and reviewing your financial plan periodically gives you the opportunity to make changes to your plan if necessary.

Plan for the possibility of long-term care. The odds of needing long-term care (LTC) services are not in your favor. The U.S. Department of Health and Human Services estimates that more than half of the people turning age 65 today will need LTC Services at some point in their lives. These services can be expensive, and Medicare and regular health insurance generally do not cover them expect in very limited situations. For these reasons, it’s important to consider potential LTC costs when planning for retirement.

If you have accumulated substantial wealth, you may be able to comfortably pay all of your LTC costs out of your own pocket. However, if you are concerned that paying for everything yourself may prematurely deplete your retirement savings, consider supplementing the amount you can afford to pay with insurance.

Your insurance options will typically include traditional LTC insurance policies and hybrid LTC/life insurance policies. Hybrid policies generally pay benefits if you require LTC services, as well as a death benefit to your beneficiary after your death, reduced by any LTC benefits you received. We can help you determine which insurance option may suit you best.

If you decide that some form of LTC insurance makes sense for you, consider purchasing it in your fifties or sixties while your health is still good.

Watch out for the 10% early withdrawal tax penalty. If you plan to retire before age 59 ½ keep in mind that withdrawals from retirement plans and IRAs before that age are generally subject to a 10% early withdrawal tax penalty. However, there are exceptions to what is known as the “age 59 ½ rule” that will let you withdraw money without penalty before that age.

Please consult with us about the exceptions if you plan to make withdrawals before you are age 59 ½ from your retirement accounts.

Rebalance your retirement portfolio when necessary. Over time, differences in performance can cause the actual proportions of stocks, bonds, and cash in your portfolio to stray from your intended proportions. For example, after an especially strong year for stocks, stocks may account for a significantly larger portion of your portfolio than you intended. And although strong stock returns are a good thing, an increase in the proportion of stocks to your portfolio indicates that your portfolio may have more risk than you intended.

Restoring your investment mix back to your chosen proportions can help you manage risk in your portfolio. The process of restoring your investment mix is known as rebalancing. Please consult us for advice about this.

For more retirement saving tips, check out our previous blog posts: 

Retirement Savings Tips by Age- In your 20s 

Retirement Savings Tips by Age- In your 30s and 40s 

Retirement Savings Tips by Age- In your 60s

With offices in Rutland and Williston, Vermont Copper Leaf Financial develops a customized wealth management plan designed to integrate every aspect of your financial life. Our approach is to conduct business in an orderly fashion, especially in a disorderly world. Where there is uncertainty we look for facts. We call our approach evidence-based investing. Call us today at 802.878.2731 to schedule a strategy session and begin building your road map to financial success.

Article published in April 2020 edition of Eye on Money. If you would like to be added to our mail list please email jennifer@dh-cpa.com.