Retirement Planning in Your 50s

Retirement Planning

Make saving for retirement your top priority in these peak earning years 

Turning 50—it’s an important landmark in your life and an ideal time to survey your personal and financial situation as you come closer to retirement planning.   With 10 to 15 years left in the workplace you’re likely in your peak earning years in your 50s. You are also likely winding down some of your larger expenses, i.e., mortgage, college funding, other debt obligations—making it a great time to review and rev-up your retirement savings strategy.  

In fact, now that you are in your 50s you may want to consider taking advantage of catch-up contributions. Catch-up contributions allow eligible individuals (who are 50 and older) to contribute additional funds to their retirement savings plan and IRA.  

How much more can you save?

Catch-up contributions up to $5,500 in 2014 are permitted by many types of retirement plans. Individuals who are age 50 and over with at least 15 years of service may be eligible to make additional catch-up contributions to their 403(b) plan in addition to the regular catch-up for those age 50 or older. Catch-up contributions to your employer-sponsored retirement savings plan must be made before the end of the plan year.

You can also make catch-up contributions up to $1,000 to your traditional or Roth IRA in 2014. Catch-up contributions to an IRA are due at the same time as your tax return (not including extensions). Combined with the annual contribution maximum of $5,000, you could bring your total contribution to $6,000.

A SIMPLE IRA or SIMPLE 401(k) plan may permit catch-up contributions up to $2,500 in 2014. Salary reduction contributions in a SIMPLE IRA plan aren’t treated as catch-up contributions until they exceed $12,000.

In addition to taking advantage of catch-up contributions when you’re in your 50s, think about the other ways that you can save even more for retirement, i.e. consider adding bonuses, tax refunds or other lump-sum payments to your retirement savings. Employing these tactics now will help you close any gaps between what you have and what you need by increasing the amount you save in the years leading up to retirement.  

What else can you be doing?

While focusing on saving for retirement is critical in your 50s, it’s also not a bad idea to consider the following:

  • Start thinking about your desire and/or possible need to continue working in retirement (i.e., working part-time, starting a second career, starting a business, etc.).
  • Consider consolidating your retirement plans. Managing your portfolio can be simpler when everything is in one place. 
  • Get familiar with Medicare and all its parts (Part A, B, C and D) as well as Medigap coverage.
  • Research your options for long term care insurance. Purchasing long term care insurance in your 50s can save on monthly premium costs compared to purchasing a plan in your 60s
  • Estimate all of your potential sources of retirement income (e.g., Social Security, pensions, income from a rental property or second job, or dividends on stock holdings). 

Source: IRS Retirement Topics - Catch-Up Contributions;