When it comes to building wealth though, your 50s are the prime of your life - a period when you have a chance to emerge from debt, enjoy your peak earning years and start to see your investments make a serious contribution to your net worth. This projection can also help you start to think seriously about the pros and cons of retiring early or working longer to achieve the maximum annual benefit. Reassess your retirement goals In addition to Social Security, look at your other retirement savings and see how much income they project to provide. Use catch-up retirement saving opportunities Looking at your projected Social Security benefits and your savings accounts relative to your goals may tell you that you have some catching up to do. Fortunately, the government gives you some catch-up opportunities in the form off additional tax-deferred retirement contributions to 401(k) or individual retirement account (IRA) plans that you can make once you turn 50. At that age, you are probably still more than a decade away from retirement, and still have an investment time horizon of some 30 or so years stretched out ahead of you. Update your will If you first made a will when you started your family, you might find things are radically different by the time you turn 50. Don’t let that make you feel old - just look at the discounts available, and think of it as an advantage you’ve earned. Eligibility is often set at age 50, and with free checking getting harder to find these days, signing up for one of these accounts can be another advantage of getting older. This is prime time.
At some point, we’ve all considered what it would feel like to retire early. When the alarm goes off early Monday morning and it takes every ounce of strength you have to roll out of bed, you’re probably wishing you could just hurry up and retire already.
But retiring early can have major consequences, and most people underestimate how much they’ll actually need to live comfortably. According to the latest Retirement Confidence Survey by the Employee Benefit Research Institute, 63% of workers are at least somewhat confident that they have enough money to last through retirement. Yet the average 401(k) account balance as of 2016 is just $96,000 — and that’s only enough to provide $3,200 in annual income over the course of a 30-year retirement.
So before you get too excited about the prospect of snoozing your alarm every morning, take a minute to think about whether you’re ready to retire. If any of the following five statements ring true for you, then it may not be worth the risk to retire now.
1. You don’t have a clear monthly financial plan
You can’t know how much money you’ll need during retirement if you haven’t created a monthly budget. Make sure you have at least a rough estimate of how much money you’ll need each month to cover necessities, as well as the amount you’ll want to spend each month for other expenses — then add a buffer, just to be safe. It’s still a good idea to have an emergency fund during retirement, so make sure you’ll have one by the time you leave work for good; it’s harder to build up your savings when you don’t have a paycheck coming in every week or two.
You also need to think about whether you’ll make any major life changes during retirement, such as downsizing to a smaller house, moving closer to the grandkids, or taking that trip to Europe you’ve been dreaming about for years.
It’s not necessary to consider every single cost — after all, it’s impossible to know exactly how much you’ll be spending during retirement — but estimating how much you’ll need on a yearly and monthly basis is the first step in determining how much you need to save before you can retire in comfort.
2. Your backup plan is to continue working for years
If you retire and then find out you don’t have enough money saved to last through your golden years, you can just rejoin the workforce, right? Not necessarily. While you can start working again after you retire, it’s not wise to assume you’ll be able to jump right back in where you left off.
If you continue to work — even just part-time — after you retire, you may lose some of your Social Security benefits. For Americans who are approaching retirement, the Social Security Administration considers their “full retirement age” to be 66 or 67, depending on when they were born. If you claim Social Security retirement benefits and then start working again before you reach that age, you may not receive your full benefits.
According to the Social Security Administration, if you return to work before you reach your full retirement age, your benefits will be reduced by $1 for every $2 you earn above the annual income limit of $16,920. If you start working again the year you reach your full retirement age, in the months leading up to your birthday, your benefits will be reduced by $1 for every $3 you earn above…