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Turning 50 is a milestone birthday – and it can be harder to ignore that retirement may be right around the corner. But research shows that many Americans reach that decade feeling financially unprepared for the future.
Generation X – the oldest will be 59 this year – is the first generation to rely on their 401(k) plans, research from Goldman Sachs notes.
Gen Xers are most likely to say they are behind in retirement, compared to other generations, found the company’s research.
A so-called financial vortex – where competing life goals get in the way of financial priorities – is to blame, according to research. For example, Gen Xers may be balancing caring for elderly relatives and children forcing them to put their own financial development on the back burner.
The typical Gen X household has only $40,000 in retirement savings, according to research from the National Institute on Retirement Security.
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Experts say even in your 50s, it’s never too late to take steps to get in good financial shape.
“While retirement is an exciting prospect for many people, transitioning can be really stressful,” said Keri Dogan, senior vice president of financial well-being and retirement income solutions at Fidelity.
The transition from saving for retirement to living in retirement is one of the biggest changes a person can make in their life, he said.
“There is a lot to do in the years of preparation,” Dogan said.
Be prepared for the unexpected
To start preparing for retirement, it helps to create a vision of what you want to look like in those years, Dogan said.
Start thinking about when you might be able to afford retirement and how you’ll manage your money and put together a list of decisions you need to make, such as how to get health care coverage. , through Medicare or privately. insurance, he said.
Also be prepared that your plan will need to be adjusted along the way.
The median age expected of workers 50 and older to retire is 67, according to the Transamerica Center for Retirement Studies. However, the research also found that 56% will retire earlier than they had planned.
The average retirement age has actually fallen to around 61 or 62, according to Dogan, because many people are retiring earlier than expected because they become caregivers, are laid off or see a change. or their health status.
“That’s one of the reasons it’s important to have a plan, so you can look at different scenarios and understand what kind of situation you’re going to be in if something unexpected hits,” Dogan said.
Ted Jenkin, a certified financial planner and the CEO and founder of oXYGen Financial, a financial advisory and wealth management firm based in Atlanta, said he often helps clients do an “optional job” that plan to leave their long-term corporate jobs for work they find more fulfilling.
Set limits with your children
Gen Xers provide more support to their children than other generations, said Jenkin, who is a member of CNBC’s Financial Advisor Council.
And with good reason. High inflation makes it a higher barrier for young adults to move on their own. Meanwhile, many have student loan balances.
But it is important to set limits on such financial support.
“Gen Xers have a really hard time saying no to their kids,” Jenkin said.
Set limits on how long children can stay on a family cell phone plan or auto insurance policy and when it’s reasonable for them to start paying rent if they’re still living at home, Jenkin recommends.
Save more where you can
Once you reach age 50, you are eligible for so-called catch-up contributions.
This year, savers at or above that age can get an extra $7,500 in their 401(k), 403(b) and most 457 plans, as well as the federal Thrift Savings Plan, a total of $30,500 in 2024.
Likewise, retirement savers 50 and older can contribute an additional $1,000 to IRAs by 2024, for a total of $8,000.
Yet many savers aren’t taking advantage of higher limits, according to Fidelity. Only 16.7% of those aged 55 to 59 are making retirement account contributions, the company found.
The good news is that even if you don’t reach the maximums, increasing your deferral rate on your retirement savings by just 1% can increase how much you have in retirement.
Social Security check, Medicare rules
It’s a good time in your 50s to look at your Social Security statement to see what retirement benefits you may be eligible for, according to Jenkin.
Importantly, you should also double-check to see that your employment records are accurate, he says. The Social Security Administration provides free access to benefit information online.
Additionally, because Medicare eligibility doesn’t begin until age 65, it’s important to think about how you can get health care coverage early if you need it. For example, it might make sense for someone to retire at age 63½ and then use COBRA coverage for 18 months until they reach Medicare age, Jenkin said.
If you’re in your early to mid-50s, this is also a good time to explore what Social Security claim strategy is best for your particular situation.
Get expert feedback
It’s hard to spot your own financial blind spots, so consulting an expert like a certified financial planner can help.
But 62% of people age 50 and older haven’t consulted a financial professional for help, according to a recent AARP survey.
While reluctance to pay for advice is a reason cited by respondents for not consulting a professional, experts say it is possible to find cost-effective help. Search tools provided by the National Association of Personal Financial Advisors; the CFP Board or the XY Planning Network can help identify potential financial professional matches.
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