By Robyn A. Friedman
City & Shore PRIME
You’ve just turned 50. Now’s the time to kick back, start planning for retirement and monitor the performance of your portfolio – no need to invest further, right? Wrong.
People are living longer these days. In past generations, many workers started saving for retirement at age 25 and then retired at 65, giving them 40 years to save and accumulate money for retirement. Then, they’d typically have 10 to 15 years to spend it. While that equation worked well for prior generations, that strategy may leave retirees with insufficient funds today.
“This is the first generation facing retirement that may have many more years in the spending phase of retirement than the accumulation phase,” says Michael Silver, a certified financial planner with Baron Silver Stevens in Boca Raton. “It’s a whole new ball game for someone over 50 and thinking about wealth creation and retirement.”
In addition to living longer, many retirees are spending more in retirement than they planned. They’re younger, healthier and more active than prior generations, traveling more and enjoying more activities.
“That obviously means they need more money to make their nest egg last,” says Mari Adam, a client advisor and branch manager of Mercer Advisors in Boca Raton.
So, if you think you can rest on your investment laurels at age 50, 60 or even 65, then you may be in for a rude awakening when you live to 90, 95 or 100 and your portfolio dwindles.
Fear not. Silver and Adam have some tips on what you can do to continue to build wealth even as retirement looms.
- Consult a financial advisor, and create a financial plan and retirement projection. “Most people don’t have a clue of how much is enough to meet their retirement needs and support their lifestyle,” Silver says. “Use conservative assumptions, and calculate how much wealth you’ll need in order to retire at a specific age.”
- If your retirement projections indicate that you are off track, then adjust your plan. That typically means saving more, working longer or seeking out a higher rate of return on your investments.
- Increase funding to your 401(k) or other retirement savings accounts, and take advantage of the over-50 catch-up rules. Adam suggests trying to save at least 10 to 15 percent of your income each year.
- Control your spending. “Focus on spending smart, borrowing smart and investing smart,” Adam says. While low-cost mortgage debt may be OK for most 50+ homeowners, because they’re building wealth in their homes, carrying pricey credit card debt is a wealth-destroyer. “COVID has shown us that people of all ages still need an emergency fund to plan for unforeseen events,” she adds.
- Don’t be overly conservative by keeping too much of your assets in cash or low-return (but safer) investments. “To cover three decades or more in retirement, as well as future inflation, 50- and 60-year-olds need to keep that nest egg growing,” Adam says. “Work out a disciplined plan to get started, using techniques like dollar cost averaging to get yourself off the bench and into the game.” While you can never eliminate risk in the markets, you can learn to manage it.
Even if you’ve been focused on your career, raising your family or paying for college – and ignoring your impending retirement – Silver has some advice. “Building wealth requires a systematic savings approach combined with a disciplined well-thought-out investment strategy,” he says. “You need to establish measurable goals, hold yourself accountable and stay disciplined. The good news for someone over 50 is that it’s never too late to start.”