This forms a part of an ongoing series revolving around savings strategies at various life stages. Past editions focusing on saving during your 30s and 40s have already been published. As you reach your 50s, you are inching closer to retirement, prompting you to devise effective strategies for a financially secure future.
You might already have a hefty retirement fund and have broadened your horizons to nestle a solid emergency fund. Your savings might feature an array of varied investments, owning a collection of assets and properties that your family can treasure for years to come.
You may feel like you have everything sorted out. However, considering advanced investment options can fortify your asset stack. Doing so can not only continue growing your wealth but also ensure a comfortable life during retirement on a fixed income.
Saving during your 50s does not need to be a daunting task. There are numerous strategies available to ensure you accrue ample savings for a comfortable retirement. Let’s delve deeper into how you can utilize various investment strategies during your 50s, and prepare to sustain off your savings.
WHAT IF MY RETIREMENT SAVINGS AREN’T ON THE MARK?
Statistics from Consumer Finances indicate that 67% of households led by someone aged 55-65 had retirement savings under $88,000. Unfortunately, this sum falls short for most to retire comfortably. Spread over a decade, this equates to a meager approximate of $733 per month!
As you knock on the door of your 50s and are worried about your retirement savings, it’s time to reassess your portfolio and make up for lost time. There are several strategies to bolster your portfolio:
Streamlining your accounts: Have you transferred your retirement accounts from previous employers? If not, you’re likely missing out on maximizing your accounts’ value. Manage your transfers with a portfolio manager’s assistance to avoid outright fund receipt and potential early withdrawal assumptions by the IRS.
Boosting savings: Increasing the proportion of your paycheck directed towards retirement funds can help bridge the savings gap. If you have been saving less than 10% of your paycheck, it’s time to ramp it up. Some advisors suggest saving up to 20% of your income, as per an article from U.S. Money.
Maxing out your IRA: While you were limited to contribute only $5,000 annually to your Roth IRA during your younger years, the limit increases to $6000 per annum once you hit 50. To catch up on your retirement savings and secure a financially stable life post-retirement, consider meeting this new limit.
Rebalancing your portfolio: This is not the time to gamble with your diversified portfolio. If your investment strategy has been risk-intensive, it’s important to lean towards safer options to lessen risk. As retirement is looming, invest wisely to avoid any rash decisions that may backfire.
Adjusting your lifestyle: Is maintaining your paid-off house proving costly? Do you have assets like a boat or rental property, which are no longer of value to you? Considering downsizing, like shifting to a smaller house or selling assets that have lost their utility to you and redirecting the saved money towards retirement. While such drastic changes can be a tough pill to swallow, they’ll pay off in the long run as you move towards a fixed income lifestyle typical of retirement.
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ADVANCED INVESTMENT OPTIONS
If you’ve been diligently saving for retirement but are looking for more ways to optimize your investments, here are some advanced investment strategies.
PEER TO PEER LENDING
Peer to peer lending involves providing an unsecured personal loan to a non-relative, adding diversity to your portfolio while assisting others. If you’re comfortable lending money to individuals excluding traditional finance routes, this option may be apt for you.
However, peer to peer lending isn’t for everyone. While you might be experienced in business lending, lending directly to individuals can feel different due to stringent requirements set for borrowers; for instance, a credit score over 700, vast credit history, and a low debt-to-income ratio as mandated by LendingClub.
Like any other form of lending, it not devoid of risks. Despite receiving interest on payments, the risk of default still lurks. It’s important to weigh the potential risks when considering peer-to-peer lending as an addition to your investment menu.
HEDGE FUNDS
Often regarded as a risky investment channel, a hedge fund involves multiple investors pooling their capital into securities and other types of investments. Managed by a hedge fund manager or a large firm, hedge funds differentiate from mutual funds as they lack an investment cap.
Interested investors should be prepared for hefty investments. As per a Forbes article about Hedge Funds 101, the typical minimum investment swings between $500,000 and $1 million with larger firms potentially demanding higher.
COMMODITIES
Commodities, referring to physical goods like oil, natural gas, timber, gold, and platinum, can be an attractive option for investors seeking investments in tangible assets. You can trade futures contracts or exchange-traded products (ETP’s) that track a specific commodity index, giving you an edge in investing in a group of commodities rather than depending on a single commodity.
Nonetheless, commodity investing carries its own set of risks. Commodities can swing wildly and can be tough to predict due to foreign market influences. Emerging markets can also affect commodity returns, according to Fidelity’s learning center. Unknown variables like governmental or economic changes in foreign lands can impact investments, so tread cautiously when including commodities in your investment pool.
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OTHER WAYS TO PREPARE FOR RETIREMENT
If you’re confident with your retirement plan and investment strategy, it’s time to prepare for the approaching 60s.
RUNNING PROJECTIONS
Whether you’re leveraging a financial advisor’s expertise or managing investments independently, it’s crucial to run the numbers to validate your savings trajectory. Numerous online retirement calculators can provide a rough picture of your retirement savings status and suggest improvements.
However, if the numbers worry you, or you seek a precise calculation, collaborating with a retirement planner can be a wise move. They possess specific experience in helping individuals navigate similar situations and can provide clarity about your financial landscape.
PLANNING A BUDGET
If your spending seems to run amok, or you haven’t reassessed your budget lately, devising a long-term spending plan compatible with your means becomes crucial. Upon retirement, you’ll be living off a fixed income, necessitating a set spending plan.
Healthcare costs are an important variable during this phase, warranting a substantial savings buffer for any emergencies or use of a health savings account to cater to your healthcare needs. As you move up the age ladder, your healthcare expenses might shoot up, needing mindful planning.
FOCUSING ON YOUR CAREER
If you’re someone who thrives on being occupied or feel anxious about having adequate retirement savings, consider devising a post-retirement income strategy. Does your experience in a field qualify you for offering consulting services? Have you developed a hobby that can generate income?
While this can be hard to picture while planning your future, it’s better to gamble on realism rather than facing a shock of potential savings inadequacy down the line. Forge connections in your existing or any other intriguing industry. This can benefit you in the future. You might also explore part-time opportunities to stay active, mentor the younger generation, and earn a little on the side.
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STRESS LESS
While contemplating retirement can raise anxieties, it could also mark an exciting beginning! Your efforts to secure your financial future reflect your level of preparedness. Keep an eye on your budget, savings, and investments to secure a stable future for you and your family.
