Where do you go from here? A financial planner shares a few tips to help get back on track for retirement.
Three points to remember about crossing the half-century mark:
• You never thought you'd make it to 50
• You never thought you'd make it to 50 looking so good
• Retirement decisions (even if you change your mind later) have to be made NOW
Here before you know it
While 50 may be the new 30 and you still party like a rock star (really?), it most definitely is time get serious about planning for retirement, even if that seems like years away. Remember how not so long ago 50 felt like it was years away? Yet here it is. While 15 years may sounds like a long time, it's really not much to save enough money for what could easily be a 30-year retirement or even longer. And look at the life expectancy statistics; for an increasing number of 50-year-olds, making it to 100 is very much a possibility.
(My good friend Julie has this to say about that, "So let's say I make it to 100 in pretty good shape, who am I going to date? A younger man of 80?")
If you've saved nothing so far, catching up on a nest egg isn't a lost cause but I'm not going to lie, it is going to be a challenge. Options and needs will vary from person to person, of course.
Do you plan on working forever? Those who are self-identified with their work such as entrepreneurs or artists wouldn't consider quitting because their life is their work and vice versa. But most working stiffs have their 65th birthday in their heads as time to retire since Medicare kicks at that age. The reality is that for most people in their 50s now, full Social Security retirement age is likely closer to 67. In reality many people leave the workforce much earlier than full retirement age. Often at 62 which not coincidentally is the earliest age you can take Social Security. Keep in mind: from health issues to layoffs, the choice of when you leave the workforce may not fully be yours.
Whatever age is in the cards for you, the point is to make yourself so financially secure so that work becomes an option, rather than being stuck on a hamster wheel working till you die just to make ends meet.
Separating needs from wants
Do you really need to lease a new BMW every two years? If I told you every new lease was delaying your retirement by one year you might reconsider that car "purchase", right? What if you get a new one every five years instead? Will you suffer? After all, you're still driving a Beemer.
Your must-have needs in retirement are all the day-to-day living expenses: Housing, food, clothing, transportation, medical fees and so on. All the fun stuff falls into the wants category: Travel, social activities, hobbies and shopping. What about those things seemingly in between? Well, if it's got the word "designer" in front of it (designer clothing, designer cars, designer vacations), it's a want.
Hear me now: Without a plan or retirement savings you will probably have trouble paying even the most basic necessities. But if you take the steps to follow a proper retirement plan you may able to accumulate a sufficient nest egg to keep many of the "wants" in your budget.
Delaying retirement has advantages
If you are starting saving later -- that is, later than your 20s -- you may need to consider postponing retirement a few years, or even potentially take other more significant measures to boost your savings rate.
Pushing back retirement may not sound fun, but it will give you the chance to stash away a little more money and give compounding interest a chance to work its magic a little longer. For example, if at 50 you've managed to accumulate $200,000 into a retirement account and then save just $6,500 per year to an IRA, (assuming an 8 percent pre-tax growth) your nest egg swells to around $810,000 at 65. By waiting until 70 to retire, you would have an additional $420,000 making a grand total of around $1,230,000*, hello, you would be a millionaire.** And this would also mean larger Social Security checks each and every month for the rest of your life.
Social Security reality check
Social Security will be big part of many people's retirement plans, but it can't be the only part. The average check just isn't enough for most people to live off of. Currently, the average Social Security check is around $1,341 per month, according to the Social Security Administration . Would that even cover your rent let alone basic expenses? It surely won't cover many nights at the Fiji resorts that I, for one, keep dreaming of.
The three things everyone needs to do in the years before retirement age (whether you plan on quitting work or not) is save, save, and then SAVE SOME MORE. Retirement isn't an age, but an achievement. It takes work to retire and to stay financially secure. But you don't have to figure this out on your own and shouldn't if you find yourself on shaky ground. Working with a professional financial planner you trust will help assure you are saving smart and keep you financially on track so there is plenty of sunshine in your golden years.
Until next time, as always BE FISCALLY FABULOUS!
DAVID RAE, CFP®, AIF® is a Los Angeles- financial planner with Trilogy Financial Services, a regular contributor to the Advocate Magazine and other fine publications as well as a financial advisor proudly serving friends of the LGBT community for over a decade. He strives to make financial topics as fun and interesting as humanly possible. Follow him on Facebook at www.facebook.com/davidraecfp For more information visit his website, www.davidraefp.com.
Article was originally published on the Financial Planner LA Blog click here to read: