Planning for Retirement in Your 50s

Your 50s is the time to start preparing for retirement. You’re probably still working and have about 15 years before making the full transition. At Williams Financial, we want to ensure you’re taking the correct steps during this decade to hit the ground running in your 60s. So, let’s look at the steps that individuals and couples in their 50s should take to prepare themselves for retirement.

Understand The Price of Retirement

How much money you’ll need for retirement depends on your lifestyle, which of course, is a continuation of your current lifestyle. The first step you’ll want to take is to have a good understanding of how much money you’re spending per month and year. Then, you’ll want to ask yourself these questions:

  • What is my current lifestyle?
  • How much do I spend on daily necessities (food, gas, mortgage, etc.)?
  • How much do I spend on extras (travel, gym membership, spa days, etc.)?
  • In general, how much do I spend in a year?

Your Williams Financial advisor can also help figure out your yearly spending. First, we’ll provide you with a spending sheet to fill out. Using that information, we’ll cross-reference it with your tax returns. Next, we can develop an annual expenditure number using credit card statements and other documentation of your spending. From there will have a good starting points and we can start a financial retirement plan.

Have a Plan

If the plan is to retire around age 65, starting at age 50 gives you 15 years to prepare. Everyone starts their retirement plans at a different place, so when you sit down with us, we tailor our plan to your goals and your current situation. Your 50s are the time to give your savings a boost and plan for any speed bumps ahead.

Your Williams Financial advisor’s job is to make sure that you reach your goals by the time you retire. When we create your financial plan, we’ll check it to make sure that there is an 85-99% rate of success. Your advisor will:

  • Look at the average rate of return on your investments
  • Run your plan through a Monte Carlo simulation
  • Run a bear market test

Finally, if you have a pension, now is the time to fully understand the conditions and details. For example, you could take a series of payments, transfer the funds to an IRA, or take a lump-sum distribution and put the money into your savings account. We encourage you to sit down with your financial advisor to go over your pension plan, so you understand all your options.

What Will You Do When You Retire?

Your lifestyle during retirement dramatically affects the amount of money you will need to save. For example, suppose your idea of retirement is reading books on the porch, going hiking, and enjoying home-cooked meals. In that case, your annual spending will be much lower than someone who wants to travel and enjoy Michelin-starred restaurants in their retirement years.

Having a good idea of what you want to do when you’re retired will give us a better picture of how to plan. Plus, since your activities will dictate where you live, you could drastically cut down on housing expenses or realize you need to save more to live somewhere near your ideal retirement activities.  

Simplify Your Life

To achieve your retirement dream, you may have to make some sacrifices in your 50s. These include working an extra year or two, downsizing, and simplifying your life. Of course, we’re not talking about a complete lifestyle change, but minor adjustments to how you do things now could make a big difference for your longer-term retirement plan

Downsize or move: Once your kids have left the house, you might find that you have more space than you need. Now is the time to downsize and move to a more suitable place for retirement. For example, you might decide to swap your house for a small cottage in a rural area to be closer to hiking trails. Or perhaps a luxury condo in the city gets you closer to the shows, museums, and restaurants you plan on frequenting in retirement.

Travel differently: The world is a big place, and you want to see it all. But did you know that it’s more cost-efficient to stay somewhere for a month versus a short week? For instance, renting an apartment in Brussels for a month is cheaper than paying for a hotel room for seven days if you want to explore Europe. Doing this type of slow traveling also means you can cook meals at home, explore neighboring countries (Belgium borders Germany, Netherlands, Luxembourg, and France), and have time to enjoy the local culture.

Simplify insurance: Your Williams Financial advisor can advise you on cutting down on insurance costs. We might find that you have redundant coverage in certain areas. Instead of carrying extra policies, those monthly or annual payments could go into your retirement fund.

Don’t Worry About Healthcare Costs

Many of our clients worry that they won’t be able to afford healthcare costs if they retire before the age of 65. This simply isn’t true! Even though Medicare doesn’t start until you’re 65, retiring earlier means a drastic drop in income. This may qualify you for state healthcare connect insurance that is less than what you currently pay at your W2 job.

Planning for retirement doesn’t have to be stressful. Together with your Williams Financial advisor, we can help you create a seamless transition. If you have further questions about your retirement plan, you can always contact the Williams Financial team.