Whether you’ve been saving for your golden years or you’ve come into your sixth decade of life with a need to get on track fast with finances, educating yourself about late-life money decisions is important. Understanding how much you should save, what type of insurance coverage you might need, and how to manage your assets in your final years helps you create stability for a more enjoyable retirement.
Preparing for Retirement: Income and Savings
It’s never too early to start thinking about retirement, and the United States Department of Labor offers a series of resources on planning financially. One of the first places to start when planning for retirement income is understanding your Social Security benefits. Every person who pays Social Security taxes via withholding on their paychecks for a certain number of years – usually at least 10 – is entitled to some amount of regular benefit pay from the Social Security Administration at retirement age. Retirement age for benefit purposes is usually 65. If you’ve somehow reached your 50s without paying into the Social Security fund and you want to ensure you’re eligible for benefits, now might be a time to consider a job with a taxed wage.
While Social Security benefits are important for many, those benefits were never meant to cover all the expenses of life in retirement. Some experts recommend having a million dollars in savings or other convertible assets before you retire, but every person’s needs and lifestyle are different. You can find numerous retirement calculators online that provide you with a basic idea of how much money you might need to live comfortably; the Financial Industry Regulatory Authority offers a calculator that helps you plan 401k contributions. In addition to retirement savings accounts, you might consider strategically managed investments and pensions to ramp up for later years. CNN Money has published an extensive resource on pensions and associated benefits.
Insurance is critical for those who are 50 or over. First, as you age, you’re more likely to experience health-related issues that make trips to the doctor or hospital necessary. Without a good health insurance policy, you could be left with untenable medical bills. Even if you have a plan, if it’s not a low-deductible plan, you might end up paying $10,000 or more out of pocket for a hospital stay. Almost nothing eats into retirement savings as fast as medical debt, and that debt can even derail any financial progress you’ve made throughout life. Harvard University reports that 62 percent of personal bankruptcies are caused by medical bills.
You can help reduce the chance of a medical emergency derailing your financial stability or legacy by purchasing long-term care insurance. The U.S. Department of Health and Human Services provides some basic information about long-term care insurance with tips on how to find affordable, relevant coverage for yourself.
Another common insurance type you might want to consider is life insurance. This is especially pertinent if you want to leave heirs a way to cover any obligations you have or if you have minor children or other dependents at a late age. Deciding how much is enough when it comes to life insurance can be difficult, and NerdWallet offers an online calculator to help you understand those needs.
Caring for Others
Plan to care for others now and in your retirement as necessary, as dependents will increase your income needs. Many people in their 50s are caring for or assisting elderly parents or relatives. Make sure you understand all the benefits your older relative is eligible for – including Medicare, Medicaid, and any financial assistance – so that you aren’t dipping too much into your own savings on their behalf.
Older relatives aren’t the only dependents you might have. Many people in their 50s still have minor children at home; woman and couples often have children in their late 30s and 40s, and a growing number of women are becoming pregnant at 50 or later. While it might be challenging, it’s important to plan and save for child-related expenses – up to and including college – without giving up retirement savings completely.
The American Bar Association has published a free on-demand webinar, along with numerous articles, about various estate-planning subjects. Estate planning is the act of discussing and putting in writing your wishes for your end-of-life plans. You can provide plans for minor children or dependents, appoint guardians, dictate how you want your assets disbursed to heirs or protect assets for heirs in legal trusts. You can also protect yourself should you be incapacitated by choosing a trusted power of attorney and creating a living will that records how you want to be treated if you are on life support. You might also want to record your wishes for funeral arrangements, such as whether you want a burial or cremation, even if you don’t do so via a formal legal document. Estate planning can be a complex endeavor, so speaking with an attorney about the process can be a good idea.
While money and death aren’t glamorous, fun subjects, thinking about them now can save you and your loved ones much stress in the future.