They say 50 is the new 40. People are living longer than ever. There was a time when your 50th birthday represented the beginning of the Golden Years. Today, though, a 50th birthday is more commonly viewed as a simple transition into the next chapter of your life.
If you recently turned 50, you have a lot of life left in front of you. You may have big plans for the final years of your career and your retirement. You also may have some complex challenges on your plate. From planning for retirement to funding your child’s education to meeting family and professional obligations, this can often be a complicated time in one’s life.
This might be the right time for you to take a step back and analyze your current financial planning and the steps you’ve taken to reach your goals. The next 10 to 15 years of your career could be your last and best opportunity to accumulate wealth and build a solid financial foundation before you enter retirement.
Below are a few questions to ask yourself. If you’re not satisfied with your answers to these questions, it might be helpful for you to have a chat with one of our Certified Financial Planners.
What Is Your Vision for the Rest of Your Career and for Retirement?
You wouldn’t start a road trip without having a destination in mind. You wouldn’t launch a major project at work without having some idea of what the outcome should be. Similarly, you shouldn’t embark on your retirement or the second half of your life without knowing what you want your life to look like.
Before you analyze the financials of retirement, it’s important to take some time to think about the more qualitative aspects. How do you want to spend your time? What values, activities, and relationships are most important to you? Do you want to cross things off your bucket list or simply relax and enjoy your newfound freedom?
You might find it helpful to create a vision statement of what your retirement should look like. Or you may want to create a list of goals and priorities. Use whatever method works best for you, but be sure to understand what you want to get out of retirement. That way you can make more informed decisions about your savings, investments, spending, and more.
Are You Saving Enough for Retirement?
Once you know what your retirement should look like, it becomes much easier to develop a financial roadmap. You’ve probably been saving for retirement for years, possibly since you entered the working world. You may have accumulated a significant amount of assets by this point. Or perhaps you started saving later in life, and feel you may be a little behind the ball.
Either way, 50 is a good time to reassess where you are and determine what actions you need to take in the years ahead. For many people, their 50s represent the highest earning years of their career. This could be your best opportunity to accumulate retirement assets.
You may want to project out your spending needs and retirement and then work backward to calculate how much you need to save every year going forward to reach that goal. That calculation can be complicated, but it’s one with which we are happy to help.
Once you reach age 50, you also have additional savings opportunities available to you. Qualified accounts like 401(k) plans, IRAs, health savings accounts, and more offer something called catch-up contributions. These are additional contributions, above and beyond the traditional contribution limits, that you are allowed to make to these plans once you reach age 50. Consider whether you need to make these contributions to accelerate your savings efforts.
Do You Have a Plan to Maximize All of Your Compensation Opportunities?
As you progress through your career, you’ve probably accumulated a variety of different benefits and compensation options. When you started your career, you may have had a salary in a 401(k) plan. Today you might still have a salary and a 401(k) plan, but also have things like deferred compensation, stock options, restricted stock grants, a pension, and much more.
Advanced compensation tools for high-level executives can often be complicated. The decisions you make on how you utilize these tools impact the benefit you ultimately derive from them.
For example, when should you exercise those stock options? What pension benefit should you select? When you negotiate the compensation in your next promotion, should your priority be current salary or future deferred compensation? Should you wait for your company stock to appreciate or realize the value of that stock now?
These questions and more are issues that successful executives, professionals, and business owners face every day. Fortunately, they don’t often come with easy answers. As you start the home stretch of your career, now might be the time to examine all of your compensation and benefit options and develop the right strategy for your needs and goals.
How Will You Fund Health Care Costs in Retirement?
You may be accustomed to a generous and robust employer-sponsored health care plan. If so, your transition to Medicare in retirement could be surprising. While Medicare is a valuable resource for retirees, many people are surprised by what it does and do not cover.
Clearly, you’re a long way from filing for Medicare. However, you’re not too young to think about how you will pay for the health care costs in retirement that are not covered by Medicare. In fact, Fidelity estimates that the average retired couple will pay $260,000 for out-of-pocket health care expenses in retirement. That estimate doesn’t even include the cost of long-term care, which can easily be hundreds of thousands of dollars.
How will you cover these expenses and still receive the type of care and treatment that you want for yourself and your spouse? You have a variety of tools available, including health savings accounts, different types of insurance, and strategic saving and investing. However, the longer you wait to plan for these costs, the fewer options you may have available.
What Is Your Contingency Plan If You Are Forced to Retire Earlier Than You Anticipated?
Some people want to retire as soon as they are financially able. Others plan on working as long as it is physically possible. Are you in the latter group? If so, what is your plan if you’re not able to work as late in life as you hope?
As you age, the probability of health issues increases. There is a broad range of injuries and illnesses that could force you to stop working earlier than you would like.
Also, job stability can change quickly. Organizations restructure and eliminate employees all the time, even in healthy economic cycles. What would happen if you were forced to tap into your retirement assets early because of job loss?
Your transition into retirement may happen as you plan. Hopefully, that’s the case. However, it doesn’t hurt to have a backup plan in place.
This is just a sampling of some of the questions you may want to consider. Also think about questions about your investment strategy, tax planning, risk management, and estate planning.
At Total Wealth Planning, we take a comprehensive approach and help you tackle all of life’s financial challenges. We are independent, fee-only advisors, so so are only priorities are helping you reach your goals. Let’s connect soon and start the conversation.
Author: Rob Lemmons, CFP® is a principal and director of financial planning at Total Wealth Planning, a fee-only fiduciary financial planning firm in Cincinnati (Blue Ash), Ohio. With over 20 years of experience, Rob oversees every client’s financial planning experience from helping to protect their wealth, corporate benefits, retirement income, and overall wealth transfer strategies. As a CPA, CEPA, and CFP®, Rob is frequently invited to speak on financial planning and tax advisory topics and has been quoted in numerous industry publications including Yahoo finance and the Business Courier. Rob can be reached at rlemmons@twpteam.com.
