Your 50’s are an exciting decade. You may have enjoyed several successful decades in your career and are now looking forward to your future retirement, which you can now see in the horizon. During this decade, there are four important financial concerns to address with your financial advisor.
1. Catch Up With Your Retirement Plan Contributions
Hopefully in your 40’s, you were able to save around 15% or more of your pre-tax income towards retirement. Whether or not you were able to meet your contribution goal, in your 50’s, you can take advantage of the catch-up contribution allowance.
If you are age 50 or older, you can contribute an additional $1,000 to your IRA accounts for a total of $6,500, and an additional $6,000 to your 401(k) to add up to $24,000. The catch-up contribution is designed to help those closer to retirement age maximize their savings for retirement. Take advantage of this catch-up provision and aim to maximize your contributions. This can help you feel more confident as you approach retirement.
2. Evaluate Your Long-Term Care Insurance Options
While some expenses go down once you retire, others can increase, such as healthcare costs. On average, a couple both aged 65 can expect to spend between $157,000 and $392,000 on healthcare costs alone throughout their retirement years.
Whether you’re worried about potential health concerns or want to protect your hard-earned wealth, it’s important to understand the long-term care insurance options available to you and whether or not a policy makes sense for your lifestyle and needs. While some policies can be expensive, requiring long-term care without insurance in place can be devastating.
Long-term care insurance covers the cost of services that include a variety of tasks you may need help with as you age. For the past 20 years that long-term care insurance has been offered, the cost was the biggest hurdle for most people. However, today’s long-term care policies offer more flexibility and benefits than ever before, and there are more options and affordable choices that are designed to fit almost any budget.
Once you reach your 50’s, it’s critical that you plan for the worst case scenario to help protect your hard-earned nest egg. An advisor can help you review your long-term care insurance options.
3. Define Your Vision of a Comfortable Retirement Lifestyle
Retirement planning can be tricky because it’s difficult to know how much you need when you don’t know how long you’ll live. How can you accurately plan for something when you don’t have the answer to all the questions? How can you ensure your retirement savings won’t run out if you live longer than expected? During your 50’s, it’s time to evaluate how you wish to live in retirement and whether your savings match up.
When evaluating your retirement income needs, it can be helpful to work backward. Estimate your retirement expenses and, from there, determine how much money you’ll need each year. Many experts agree that the average retiree will need to replace about 80% of their income in retirement. If you can pay off your mortgage and other debt before retirement, this percentage may be even lower.
However, if you intend on traveling and spending more on entertainment and leisure in retirement, you may end up spending more than you did while working. Don’t assume you'll need less money. Instead, base it on whether the expenses you anticipate will either decrease or increase. Build a budget based on the costs related to the activities you’d like to pursue.
4. Consider the Legacy You Want to Leave
You’ve taken the right steps to build a financial legacy for your family, but have you considered how you will share your history and wisdom with future generations? This is the ideal time to invest in preserving your legacy. Consider how you want your wealth to be used after you’re gone. Do you imagine funding your grandchildren’s college education costs? Have you thought about charitable causes you’d like to fund? An advisor can help you evaluate what inspires you.
During this decade, you’ll also want to make sure both you and your spouse are on the same page financially. It’s much easier if your spouse or closest family member is well aware of what your intentions are, where you physically keep the family’s financial documents, and how you envision your assets being used in the future.
Getting Started
Your 50’s are a big decade in life and an important time to focus on your future retirement needs. A financial advisor can help you stay on track as you work towards your retirement goals and plan for the legacy you wish to leave. To learn more about how I work with my clients or the conversations I have with them, I encourage you to check out my blog at www.mikeloo.com/blog.
About Mike Loo
Mike Loo is an independent financial advisor with more than 20 years of experience in the financial services industry. His mission is to provide a meaningful impact on the lives of clients and the people they care most about, help them make educated decisions with their money, and build a strong financial foundation for both themselves and their next generation. Mike is committed to meeting a high standard of excellence, taking the time to listen to clients’ needs, and designing strategies that aim to help clients save money and reduce debt. He seeks to fit a client’s investments into their life and educate them so they’ll understand their investments. To learn more about how Mike may be able to help, connect with him on LinkedIn, call his office at (949) 221-8105 x 2128, or email him at michael.loo@lpl.com.
Securities offered through LPL Financial, Member FINRA/SPIC. Investment advice offered through Trilogy Capital, a registered investment advisor. Trilogy Capital and Trilogy Financial are separate entities from LPL Financial.