Planning for retirement in your 50s

You’re in your 50s. You have a great job, a mortgage to pay, kids to put through college. It’s too soon to retire. But it’s never too soon to start planning – and saving – for retirement.

Baby Boomers are retiring later due to a variety of factors, including the economic downturn. Gallup’s annual Economy and Personal Finance survey conducted in spring 2013 showed that the average retirement age has increased by four years over the past two decades – from 57 in 1991 to 61 today.

But the survey also showed that 55 percent of those 50 to 64 who were still working said they won’t have enough money to live comfortably in retirement.

How to make sure you’re on the right track toward a financially secure retirement? Here’s some advice from the experts.

Get your spending under control.

People in their 50s are often at the top of their careers, making a good income. They have kids in college. Retirement might not be a priority.

“They want to pay for all of their kids’ college expenses, but not for retirement,” says Colleen Miller, a financial planner and owner of Finance by Design in Fort Collins. “But the saying is, ‘You can borrow for college. You can’t borrow for retirement.'”

Taking control of spending also means making tough choices.

“People in that age group like to spend money,” says Randee Cook, a financial planner in Greeley.

“Maybe they decide they want to make a large purchase they think they deserve,” a bigger house, an expensive car or trip. “You need to think that through.”

Also important: “Make sure you can tell your kids no,” says Raquel Hinman, a financial planner with the Wealth Conservancy in Boulder. “A lot of people are still supporting kids who are in their 20s and 30s. I know that sounds harsh, but you have to tell them no if you are going to have enough to retire.”

Contribute to your 401(k) or other tax-sheltered retirement plan. And take advantage of your employer’s maximum matching contribution.

“Make sure you’re saving something. That’s key,” Miller says. And she cautions, “Be careful how you invest it. If you haven’t saved enough, don’t be aggressive and think you can make it up. That hardly ever works.”

Sharon Fain, who at 47 is a few years shy of the Baby Boom generation, said she’s been contributing to her 401(k) for the 23 years she’s been working for different employers.

“I always take advantage of the employer match,” says Fain, who works for Black Hills Corp. in Cheyenne, Wyo.

Though many financial planners caution against tapping a 401(k) for a loan, Fain says she “feels OK” about it if the need arises. She and her husband recently bought a cattle ranch and a new house. “We have to buy cattle. We have a 9-year-old daughter to put through college.”

Pay down debt.

For Hinman, that includes paying off your mortgage. While some financial planners don’t see that as a priority because of the tax benefits, Hinman says “that just gives you more control over your cash flow.”

Set goals, but be realistic.

Despite all the online retirement calculators designed to help you figure out what you need, there’s really no one set formula, the experts say. While many people underestimate what they will need to retire, others set unrealistically high goals. You might think you’ll need $2 million in the bank, but how will you get there?

Decide what you want to do. Do you want to travel extensively or do you want to camp in the mountains?

Look at your budget, your lifestyle, your fixed expenses and your discretionary spending, Cook says. Are you willing to scale back?

And remember to figure in the cost of inflation, Hinman advises.

At what age do you want to retire? Many people these days plan to continue to work and earn money in retirement – either because of need or desire.

Fain says she doesn’t see herself ever retiring completely. “I plan to give back to the community. Maybe I’ll leave the corporate world for nonprofit work.”

Consider meeting with a financial planning expert, even if only once, to help you run some numbers and set up a plan. Stay flexible and review that plan at least once a year.

Figure in health care and old-age costs.

“Many people underestimate what they will need for health care,” Hinman says. “If they retire before 65 (when they’re eligible for Medicare) and something happens, that can be devastating.”

She points out that some people who are covered under an employer insurance plan have no idea what insurance costs are.

With the average life expectancy now at 81 for women and 76 for men, you also should consider how you will pay for old-age costs.

“People in their 80s and 90s might need help. They might need somebody to come in and make their meals. Or they might need to go to a skilled-care facility,” Miller says. “Long-term care is becoming more expensive. How are you going to pay for that? People in their 50s have to start thinking about that.”

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