If life's circumstances have forced you to put off dealing with your retirement plans until later in life, the road to a successful retirement is different from that of someone who's just starting out. Whether you're just getting started or are ready to add the finishing touches to your existing plan, these tips will guide your way.
Make the most of your IRA or 401(k) opportunities
If you're already contributing to a retirement account, make sure that you're contributing aggressively. Increase your contribution. Think you are already at the max? Well, if you just turned 50, you are now eligible to make catch-up contributions.
If you aren't contributing, talk to your human resources people. Does your company offer a 401(k) plan? If so, fund it as aggressively as you can. This is tax-exempt retirement money. Find out if there is a company match. Many companies match employee contributions up to a specified amount. This is free money. Take it.
If you don't have access to a 401(k) at work, see your banker to open an IRA.
Fund a health savings account
Medical bills are a retiree's biggest expense. A health savings account (HSA) will allow you to pay your health expenses both now and after retirement from pre-tax dollars. You must be covered by a high deductible health plan (HDHP) to qualify for an HSA.
See your employer (or insurance broker) for the details, but an HSA is a great deal. Fund it to the max or as much as you can afford to. The money you don't spend on qualified expenses this year will carry over from year to year, so there will be money to pay for medical bills in your retirement.
Take a look at the house payment
Make extra principal payments now to eliminate that monthly payment before you retire. If you can't get it paid off before you retire, consider refinancing now while you're still working. You can continue to make the big payments now while you're working, but cut back to the minimum required if your income drops on retirement.
Add a fun part-time job
Most people spend at least what they earn from their full-time job just getting by, making saving for retirement difficult. Consider adding a part-time job at a fun place and bank the money you make for retirement.
Choose a hobby or interest and find a way to get paid to do it. Like wine? Work a couple nights a week in a wine store. Gardening a hobby? Seek a seasonal position in a nursery or garden center. Got a skill and handy with tools? Go make some money doing odd jobs for people who aren't.
Upgrade hard-goods
Take a look at the hard-goods in your house, (appliances, heating and air conditioning units, and so on), with an eye to their life span. Its way more convenient to replace an aging air conditioner or washing machine now, when you have financial options, than later when you may be on a reduced fixed income. Plan for success, buy on sale, and sell the old unit to reduce the purchase price even further.
Eliminate debt
Servicing credit card debt is costly. Stop using them and pay them off! Then bank the cash you normally spend on interest for retirement.
Next to the house payment, a car payment is the average American's biggest monthly expenditure. If you have to have a car payment, get it as small as you can. Drive a Chevy, not a Caddy. Buy a slightly used car and learn to work on it yourself. Bank the cash you save for your retirement. But don't scrimp on your "wheels" too much. You will want reliable transportation when you retire.
Stay healthy
Having your health is like having money in the bank. Exercise regularly and don't avoid the doctor's and dentist's office! Those preventive care visits really pay off. Buy a used bicycle and use it in place of your car for minor errands or to visit friends. Use your head, don't go out and spend a lot to save a little.
Downsize the lifestyle
Perhaps it's time to start thinking about life after children with an eye toward saving for your future enjoyment in your retirement. Do you need that extra car that your daughter used to drive? Or for that matter, do you need her room?!
Moving into a smaller house could result in a smaller payment as well as equity in the bank. Convert those toys that you don't use anymore into retirement cash. Sell the boat that just sits in the garage nowadays and bank the cash.
Invest smartly
So you've been banking cash from your improved lifestyle into a savings account, but the interest on a savings account is often less than 1%. Welcome to the real world. Investing in stocks and bonds can provide a better return, but is inherently more risky. So, what's an over-50 retirement investor to do?
Most 401(k) and IRA plans offer "lifestyle" accounts that are set up to create the right mix of stocks, bonds, and cash accounts for your target retirement year. Certificates of deposit (CDs) pay better rates of interest than savings accounts.
Do the research and invest smartly.
Pay yourself first
Once you start on your post-50 retirement savings plan, remember a cardinal rule: Pay yourself first. Even if you are in the paying-down-credit-cards phase of your plan, you can still pay yourself something. It's important to see some cash start to accumulate, even as the debt goes down, so that you see progress from your plan.