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The home stretch … Your 50s and 60s

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Katy Certified Financial Planner - Retirement Planning - Ages 50  through 60

Now is the last opportunity to really sock away retirement dollars. Ideally, you’re at your peak earning years and some of the major household expenses, such as a mortgage or child-rearing, are behind you, or soon will be. Perhaps you’ve inherited money from your parents. (On the other hand, you might have parents who need your financial help.)

 Take advantage of the catch-up provisions Congress passed in 2001. Workers age 50 or over can invest extra dollars into their employer’s retirement plan (if the plan allows it) once they’ve maxed out their regular contributions. The extra amount is $5,000 in 2006 (adjusted for inflation).  

You also can put a $1000 catch-up amount annually into your IRA starting in 2006.   Once you maximize contributions to your employer’s plan, and IRAs if you qualify, invest additional money into investments that don’t create much taxable income.

Investing at this stage typically needs to be more cautious. As a general rule, we recommend shifting a portion of your higher-risk investments into less volatile (and usually lower returning) assets. But we also typically recommend maintaining a significant exposure to stocks. You still have a lot of years ahead of you, both to reach retirement and during retirement itself. You’ll need some assets that can stay ahead of inflation.

What kind of retirement?

It ’s time to start focusing more closely on what kind of retirement you want and what financial resources you have to pay for it. The choices are many and so are the costs associated with them. We often advise people to “practice” at their retirement. Want to move? Vacation there several times—in all seasons. Try out that hobby you’ve always thought about.

Share your dreams with your spouse. It’s important that both of you explore and work out differences. What if one wants to travel and the other wants to stay home?  

Calculate what your dream retirement will cost if you haven’t already—but avoid rules of thumb. Arbitrarily figuring you’ll need only 70 or 80 percent of your pre-retirement income may prove too low, or too high.

Calculate what realistic financial resources you’ll have to pay for your retirement. Also, talk to us about how you’ll roll over your retirement assets in ways that either preserve their tax deferral or reduce potential taxes.

Little time to save?

  • What if you have saved little toward retirement yet you want to retire soon? Your options are more limited at this stage. 
  • Reduce expenses and invest the savings
  • Increase income through a second or better paying job
  • Maximize retirement plan contributions
  • Invest more aggressively, though not recklessly
  • Postpone retirement or retire part-time
Make smart withdrawals from retirement accounts once you retire.

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