Planning Ahead for Retirement Gives You Peace of Mind

When you reach your mid-40s, retirement is not as far off as it once seemed. You have another 20 years to make sure you meet your financial goals for retirement. Now’s the time to hone in on where you want to be, financially. Are you on track to reach your goals for retirement income, or do you have some catching up to do?

“By this age, you probably have kids going off to college, and you may be close to paying off a mortgage and student loans,” says ASCP Chief Financial Officer Bobby Lendi. “Some of these expenses we’ve had most of our adult lives have gone away, and you should start having additional free cash available.”

Here’s the reality check. By age 50, you should have six times your salary saved for retirement.

“If you’re an aggressive saver, this is not out of reach,” Lendi notes.

The Internal Revenue Service (IRS) uses age 50 as a delineator when talking about how much one can put away in a 401(k) or an individual retirement account (IRA). So, for example, in 2019, if you’re under 50, you can put a maximum of $19,000 in your 401(k) and a maximum of $6,000 in your IRA.

However, the IRS has a catch-up provision for individuals 50 and over. In addition to investing up to $19,000 in your 401(k) and $6,000 in your IRA, you can contribute another $6,000 in your 401(k) and another $1,000 in your IRA.

“It’s the government’s way of saying, ‘Hey, you’re 50 and now is a good time to look at what will happen in the next 15 years,” says Lendi. “Now is the time to invest that extra cash and realize the benefits of putting that away for retirement.”

Concurrently, you’ll also want to review your existing debt. If you have “high-cost debt” (i.e., credit card debt that carries an interest rate of eight percent or higher, or a revolving loan with an interest rate of between 10 to 12 percent), pay down that debt first.

“It’s disadvantageous for us to push a lot of money into a retirement account only to retire and still be shackled with debt,” he says.

As you get closer to your desired retirement age, start creating a retirement budget. You want to have a very clear idea of what you will be spending every month after you leave the work force. Make sure to account for all potential expenses, the largest of which is likely to be health care, and be sure that you have sufficient resources saved to ensure the quality of retirement that you desire.

If you do your planning now, you can breathe a sigh of relief that you’ll have the resources you need when you do retire!