Fretting About Retirement? It's Time for a Plan!

As you enter your 40s and 50s, retirement may start to feel closer than ever. While it’s never too late to begin planning for your future, the choices you make in this stage of life can have a huge impact on how well-prepared you’ll be for retirement. Whether you're looking to retire at 60 or 70, the goal is to set yourself up for financial stability and peace of mind. Miguel Baldemor, Relationship Banker at the Prevail Bank Stevens Point branch provides some tips for those in their 40s and 50s who want to assess their retirement prospects and make adjustments where needed.

Step 1: Reevaluate Your Retirement Goals

At this stage in life, you may have a clearer sense of what you want out of retirement. Is it an early retirement to travel and pursue hobbies? Or are you planning to stay in Wisconsin, maybe downsize your home, and enjoy more time with family? Understanding your goals is critical because the more specific you are, the better you can tailor your strategy.

Questions to ask yourself:

• Do I want to retire early, or am I planning for a later retirement?
• How do I want to spend my time in retirement (travel, part-time work, hobbies, etc.)?
• Will I stay in Wisconsin or move to a different area?
• What type of lifestyle am I hoping to maintain (active, low-maintenance, or luxurious)?

Taking time to consider these details helps create a more concrete vision for your future, which in turn will make it easier to plan.

Step 2: Understand What You’ll Need Financially

In your 40s and 50s, you’re likely well into your career and may have significant financial obligations like a mortgage, tuition for children, or other debts. It's important to get a realistic picture of how much money you'll need to retire comfortably.

A general rule of thumb is that you'll need about 70-80% of your pre-retirement income to maintain your standard of living, but your personal needs could vary. Think about:

• Healthcare costs: At this stage, it’s wise to start considering how healthcare costs will impact your retirement. Medicare doesn’t kick in until you’re 65, so you’ll need a plan for coverage before that. If you retire early, private insurance or a health savings account (HSA) might be options.
• Social Security: While it's tempting to rely on Social Security, it’s best to treat it as a supplement, not your primary income. By visiting the Social Security Administration’s website, you can get an estimate of what you might expect.
• Inflation: The cost of living typically rises over time, so plan for inflation, especially as retirement can last 20–30 years or more.

You might want to do a rough calculation of your expenses and compare that with your expected retirement income. If there’s a gap, it’s time to start thinking about how to fill it.

Step 3: Take a Hard Look at Your Savings

It’s easy to put retirement saving on the backburner, especially with the demands of your 40s and 50s, but now’s the time to make sure you’re on track. Your savings in this stage should be focused on building wealth and reducing debt, setting yourself up for a secure future.

Here are key points to consider:

• Retirement accounts: Are you taking full advantage of retirement savings accounts like a 401(k) or IRA?
• IRAs – There are two types of IRAs, Traditional and Roth. 
  • Traditional IRA contributions are tax-deductible; earnings are tax-deferred; you pay taxes on this money when you withdraw it.
  • Roth IRA contributions are made with after-tax dollars. Your earnings grow tax-free and withdraws are tax free.  Roth IRAs have fewer restrictions than Traditional IRAs too.
• There are other differences; talk to a financial adviser to determine which is best for you.
• Catch-up contributions: If you’re over 50, you may be eligible for “catch-up” contributions to retirement accounts. This allows you to contribute more money to your 401(k) or IRA than younger savers. These additional contributions can make a big difference in the long run.
• Debt: Consider paying down high-interest debts, such as credit cards. Reducing debt will allow you to redirect more money into your retirement savings.

Tracking your current savings and estimating how much more you’ll need to save each month can give you a clearer picture of what you’re working with.

Step 4: Build an Investment Strategy

By your 40s and 50s, you should have a solid investment strategy that aligns with your retirement timeline. At this stage, you may have some tolerance for risk, but you may want to start transitioning to a more balanced, diversified portfolio.

If you haven’t reviewed your investment strategy recently, it’s a good idea to consult with a financial advisor who can help ensure that your portfolio is aligned with your retirement goals.

Step 5: Regularly Review Your Plan

Now is the time to develop a habit of reviewing your retirement plan every year. Life changes, such as a career shift, a major purchase, or a family event, can all impact your retirement savings goals.

Questions to ask yourself on an annual basis:

• Have my savings and investment strategies been effective?
• Am I on track to meet my retirement income needs?
• Have I accounted for changes in my living situation, health, or income?

Regular check-ins will keep you on track and help you adjust your strategy when needed. The earlier you spot potential gaps, the easier it will be to address them before they become larger issues.

Step 6: Seek Professional Guidance

If you’re feeling uncertain about your retirement strategy, now is the time to consult a financial or tax advisor. They can provide customized advice based on your unique situation and help you fine-tune your investment and savings strategies. Prevail Bank offers retirement planning tools that may help guide you through the process.

In Conclusion

While you’re getting closer to retirement, there’s still plenty of time to make strategic decisions that will set you up for success. By taking a closer look at your goals and assessing your savings and investments, you can develop a more confident and clear retirement plan. Don’t forget to make regular adjustments as life changes, and remember that professional help is available to guide you every step of the way.

Retirement is within reach—make the next 10-15 years count!

Connect with a Prevail Bank Relationship Banker, to talk about how Prevail Bank can assist with your banking needs.