By Cynthia Measom
As you approach the decade before your retirement, you might find yourself contemplating whether all of your financial ducks are in a row.
“In your 50s, you are in the prime of your life, the kids are out of college, and you’re helping them get started,” said Brent Weiss, certified financial planner and head of financial wellness at Facet. “Family expenses start to ease, you’re in your highest earning years and you start to see retirement on the horizon. You may also be dealing with parents that are getting older and starting to need a little help now and then. This is when most people become laser-focused on retirement.”
The 10 years before you retire are a valuable window of opportunity. Here are five money moves you must make, according to a financial planning expert.
Take Advantage of Catch-Up Contributions
If you haven’t taken advantage of catch-up contributions and are of age to do so, now is the time to start.
“Once you turn 50,” Weiss said, “you can make catch-up contributions to various retirement plans. For 2023, you can now contribute up to $7,500 more to your 401(k), 403(b), federal Thrift Savings Plan and most 457 plans. Traditional IRA and Roth IRA contributions increased to $6,500 per year, up from $6,000. You can also add an extra $1,000 per year to your health savings account, but you have to wait until age 55. Now is the time to supercharge your savings.”
Reassess Your Investments and Risks
As you approach retirement, Weiss said, your investment priorities should start to shift from growth to protecting what you’ve already saved.
“This doesn’t mean being too conservative” he said, “as you will still need your money to last decades into retirement, but assess your overall level of risk to make sure you are comfortable with it. And don’t forget the trade-off between investing more or paying off debt — like your mortgage. There is no right or wrong answer, but it’s an important decision to make.”
Prioritize Tax Diversification for Investments
“Having different accounts that are taxed differently puts you in control of how you create income in retirement and helps you minimize your taxes,” Weiss said. “You want to invest in different types of accounts like a 401(k), Roth IRA and a taxable investment account. And with kids out of the house, a health savings account could be a great way to save for retirement healthcare costs due to its tax advantages.”
Assess Your Retirement Readiness
To assess your retirement readiness, Weiss said, it’s important to take a good look at what your expenses may be in retirement and size up your income sources and your investments.
“You’ll want to determine how much income you will need, what you are on track to have and identify any gaps,” he advised. “This assessment can help you develop a strategy to reach your retirement goal. If you’re feeling behind, that’s OK. There are still planning moves you can make, but you need to act now.”
Focus on Health and Well-Being
“Retirement healthcare costs are one of the biggest expenses you will face,” Weiss said. “Making sure you are in good shape physically can substantially reduce your costs. And now is the right time to begin planning for long-term care (LTC). Not everyone needs LTC insurance, but everyone needs a plan for the costs of ongoing care that health insurance doesn’t cover.”
Additional Information as You Prepare for Retirement
Weiss offered the following key numbers to measure your progress. He said to keep in mind that no number is right or wrong for you. Instead, he said these are guidelines to help you assess where you stand:
— How much of your income to put away: “15% is good, 20% is ideal and 20%+ is great,” he said.
— Your savings goal for when you hit 60: Aim to have eight times to 12 times your annual household income saved.
Article previously published online at GOBankingRates.com. Reprinted with permission.