By the time 50 is on the horizon, most people have realized the truth: you never really feel like an adult. Yet the adult responsibilities keep piling up as you approach retirement age. Maybe you’re caring for aging parents—or becoming a grandparent yourself. You’ve likely got a mortgage, and you’ve definitely got a retirement account… right?
If you’re worried about being financially unprepared to enter your 50s, you aren’t alone. These are the big money milestones you should reach at 50—plus, what to do if you aren’t quite there yet.
The Big One: Retirement Savings
While everyone will hit certain financial milestones at their own pace, saving for retirement is one thing that can’t be put off until tomorrow. If your fund isn’t as robust as it should be, then make it a priority today.
Elizabeth Gravier, writing for CNBC Select, reports that just under half of people surveyed believe that they’ve saved enough for retirement. The 2020 Transamerica Center for Retirement Studies survey showed that only 47% of respondents felt confident about their retirement savings. While it’s somewhat comforting to know that the majority of 50-somethings are still trying to figure things out, that statistic paints a worrying picture for the future.
How can you join the group that feels confident about providing for their retirement? A good first step is to talk to a financial planner. They can help you determine how much extra you need to start saving, how to reduce expenses now to be more comfortable later, and even advise you on how to change your investment strategy to meet your goals.
Employees over 50 can exceed the current 401(k) contribution cap of $20,500 a year by an additional $6,500 without any tax penalties. This “catch-up contribution” can help you get back on track to retire on time. The only catch is that you’ll have to find the extra savings in your current budget.
Budget Like a Retiree Now
Are you still spending like you’re 30? As you get older, your financial needs change. So do your financial responsibilities. In order to protect your future retirement, it’s a smart idea to start budgeting like a retiree now. What does that mean? For most people, it starts with being much more conservative about spending. Every dollar you throw away today is a dollar that you could have saved for retirement.
Cutting back on nonessential spending can help you reach your retirement fund goals much more quickly. However, denying yourself your favorite coffee in the mornings is just a small part of the larger financial picture. Your housing costs are much higher than your daily Starbucks run (unless you’ve got a serious coffee problem), so consider downsizing if possible.
Many folks in their 50s are empty nesters or at least headed that direction as kids head off to college. Do you really need as much space today as you did at 40? How much could you save by downsizing to a smaller home? Don’t just consider the mortgage or rent; tally up taxes and insurance, heating and cooling costs, maintenance and upkeep fees, too. Make the cost analysis of your household vehicles, too. Do you need multiple cars? Are you carrying too much insurance on older vehicles?
Ideally, your retirement budget should be between 70% and 80% of your current spending. If you aim to reduce your budget to that target now, you can put the money you save to work as investments for your future.
Set New Boundaries
Reframing your own attitude toward money is hard enough. Getting your friends, family, and coworkers to change their attitude toward your money can be even more difficult. If your friends are used to living a certain lifestyle—one that involves expensive brunches, weekend trips, and recreational shopping, for example—then your relationship might become strained if you suddenly start turning down invitations.
It’s best to be honest and upfront with your loved ones, and it’s well past time that we started normalizing conversations about finances. Tell your friends that you are focused on saving money and suggest a lower cost or free activity to do instead. If they value your friendship, then they’ll understand. If not… well, maybe you’ve outgrown that relationship.
Setting financial boundaries with family can be unpleasant, but it’s a talk you need to have if your partner, children, siblings, or parents see you as their personal piggy bank. Again, it’s better to take a proactive approach to this conversation. Rather than waiting until the next time a loved one comes to you for money, talk to them now. Explain that you are approaching retirement age and will not be able to help out the way that you used to.
Encourage your loved ones to take control of their own finances but be prepared for pushback. Nobody likes to be told “no,” but in this case, it’s essential to establish a firm boundary.
Reevaluate Your Assets
Do you know your net worth? Sitting down to calculate your assets and liabilities isn’t the most fun way to spend an afternoon, but it’s important to have a clear, up-to-date understanding of your current finances.
To calculate your net worth, you need to list all of your assets. That includes any money in your checking, savings, and retirement accounts. Count stocks, bonds, and other financial instruments, too. Focus on appreciating assets (i.e., real estate) rather than depreciating assets such as vehicles, high-end electronics, and fine jewelry. When calculating your net worth, subtract your mortgage balance from the appraised value of your home, then add the result to your “assets” column.
In the liabilities column, list all of your loans and debt. Ideally, you’ll end up with a positive number once you subtract your total liabilities from your total assets. According to NerdWallet, people between the ages of 45-54 typically have a net worth of $168,600 as of 2019. Retirement accounts and home equity will be the biggest contributors to that sum.
Maintaining an updated ledger of assets and liabilities is important as you plan for retirement. Although you might prefer not to think about it, it’s also important for estate planning. If you haven’t updated your will recently—or if you’ve been putting off filing a will at all—then now is the right time to take care of that.
Establish Multiple Streams of Income
Now that you’ve adjusted your budget and evaluated your net worth, what’s next? To maximize your retirement savings potential, consider establishing multiple streams of income. While the gig economy and hustle culture are typically the domain of the young, scrappy, and hungry Millennials and Gen Z, you can still earn extra cash on the side in your 50s.
A diverse portfolio of investments can generate passive income—meaning that your money will earn money while you sleep. Laddered bonds and certificates of deposit are low-risk options. That means buying a variety of bonds and/or CDs with staggered maturity dates. Instead of having all of your money tied up in long-term investments, you’ll maintain a steadier cash flow. You can also respond more quickly to market changes and interest rate fluctuation, reducing your overall risk.
Starting a small business in your spare time is more feasible than ever these days. You may find that setting up a side hustle now will help ease the transition into retirement. There are far too many possibilities to list here, so check out our favorite picks for hassle-free side hustles!
Invest in Your Health
Although it might seem counterintuitive, spending money on your healthcare and wellbeing is actually a smart investment for your retirement. Not only will you be able to enjoy your golden years more if you’re able to travel and participate in hobbies, but you’ll also reduce your risk of developing expensive health problems.
What does it mean to invest in your health? Everyone’s healthcare journey is different, and it should begin with a chat with your doctor. However, you can take steps now to be more active, eat a healthier diet, and take a proactive stance toward your wellbeing. Taking better care of yourself now can help you avoid developing chronic conditions or slow the progress of conditions that you’ve already developed. Here are three ways to start improving your health now.
Sleep: Getting enough quality sleep should be your top priority. If you’re not already in the habit of getting the recommended eight hours, then work on establishing a healthier nighttime routine. Put your phone and other screens away at night, don’t eat right before bedtime, and create a relaxing environment in your bedroom.
Exercise: Being more active during the day can help you sleep better at night. A sedentary lifestyle is not ideal for anyone, but it can be especially harmful as you get older. You’re already facing an uphill battle to retain muscle mass and bone density; sitting all day will only make it harder to stay fit and healthy. Walking is an ideal low-impact exercise for many people; however, talk to your doctor about the options that are best for your health.
Stress Management: Finally, make sure that you’re managing stress. It’s understandable to feel worried, even anxious if you have fallen short of your financial goals at 50. Long-term stress can have a devastating effect on your mental and physical health, though, without actually helping you solve the problem that triggered it. Meditation has been shown to reduce stress, so consider incorporating it into your daily routine. Spending time with loved ones (and pets!) can also lower your stress levels.
Perhaps most importantly, remind yourself that you are actively working toward your goals. You might not have reached those milestones yet, but you are making progress.