You are never too young to think about — and plan for — retirement. But the older you get, the more important it becomes. When you turn 50, you’ve hit a crucial year, and you should reassess your retirement strategy. We use the term "reassess," but in reality, some people may be "assessing" for the first time — though waiting this long is not recommended.
So where do you begin? There are several formulas. In a recent Yahoo Finance article, David Rae, a certified financial planner, suggested this: "Add up all of your life savings — your 401(k), your investments, the money under the mattress — and then divide that by 25. Could you live on that amount comfortably for one year? ... If the answer is yes, then you may be on track for retirement.”
Whether you’re headed in the right direction, or have to course-correct, Yahoo Finance offers a few quick tips:
Maximize current retirement contributions. "Starting at age 50, you're eligible to increase your 401(k) contributions by an additional $6,000 per year, and can increase contributions to IRAs or Roth IRAs by an additional $1,000 per year," says Matt Hylland, an Iowa-based registered investment adviser.
Carefully evaluate asset allocation. When you first invested, you may have been riskier than you want to be today. It’s important to know what sort of investments you have and to make sure you are comfortable with where your money is placed.
Drop unnecessary insurance. You may have signed up for a policy years ago with your spouse or children in mind, but they might not be financially dependent on you anymore.
Even after reviewing these few tips, there’s more to consider. AARP previously reported on five ways to realign your retirement. It’s also important that you define your retirement plan and understand that everyone’s plan is different.
As proven by responses in an AARP Online Community forum, when people choose to retire varies greatly. One community forum member commented: “I'm hoping to be able to [retire] in 3.5 years at 55. I'll have three pensions and two 401(k)s to live on, and then Social Security will hopefully cover any cost-of-living increases by the time I start collecting.” Others are looking forward to retirement in their 60s, but not their 70s. “I want to retire at 62 and want to travel and enjoy life. I do not want to work until I am close to 70,” said another Online Community forum member. In a reply to one of the messages, a member summed up the conversation magnificently: “This is really a personal decision, as the factors are unique to each person, as are the reasons to stay or go.”