Financial Retirement Planning for Men 50 and Over

Yes, I know. “Do we look like we’re ready to retire?” But let’s face it, retirement is on our horizon and that thought can keep you up at night. The question men 50 and over need to be asking is; “Am I planning for retirement correctly?” Thankfully, when it comes to retirement planning in your 50’s, you’d be amazed at what 10 to 15 years of proper planning can do for your nest egg. Here are a few tips on retirement planning in your 50’s regardless of how much you’ve saved, how financially savvy you are and what your income may be.

3 Tips On Properly Planning For Retirement

The problem most people run into is confusing themselves on how to plan for retirement. And realistically, there’s no shortage of apps, articles and novels about different strategies to save for retirement in your 50’s. Before we get into the 3 tips to properly planning for retirement in your 50’s, here’s a bonus tip (perhaps more valuable than all three tips listed below): keep it simple.

Tip #1: Retirement Planning Is Really A Basic Math Equation

How do you make sure you’re on track for retirement? It’s simple math. To start, answer these three questions:
1. How much money per year do you want to live on during retirement?
2. How much do you have saved for retirement today?
3. How much do you need to save to reach your desired retirement income?

Here’s an example:

Joe wishes to live on an income of $50,000 per year in retirement, retiring at age 65. Joe is age 50, and has saved $900,000 for retirement. The rule of thumb to save for retirement is to save at least 25 years worth of your desired income to be able to retire. Thus, Joe needs to save $50,000 x 25 years, or $1,250,000 total to retire. This means he needs to save approximately $350,000 in order to retire comfortably.

Once you’ve figured out the total you need to save until you reach your desired savings amount, the next step is investing your money properly to accelerate your savings rate. $350,000 may seem daunting for Joe, but compound interest can make that number much more achievable when properly invested.

Tip #2: Understand The Different Retirement Vehicles Available to You

Don’t let the different retirement accounts and the different investment options intimidate you. In short, there are different accounts available to you based on your job, and different investments you can utilize to reach your retirement goals. Here is a breakdown of each:

401k Retirement Account:

These are offered by employers to give their employees options to save automatically for retirement. They deduct your desired savings amount for you from each paycheck, and often will match your contributions for added savings. If your employer offers a 401k, you should be saving as much as you can and taking advantage of the matching benefits because hey, it’s free money! See more on 401k and 403b plans here.

403b Retirement Accounts:

These essentially the same as a 401k, but offered to employees who work for government entities. This should be utilized and contributed to the same as you would a 401k. See more on 401k and 403b plans here.

Individual Retirement Accounts (IRA’s):

These are available to any individual who wishes to save for retirement outside of employer benefits. IRA’s have tax benefits based on the type of IRA account. Traditional IRA’s allow you to make contributions before taxes are paid, allowing you to deduct contributions from taxes today. Roth IRA’s allow you to pay taxes today on contributions, but have the benefit of growing and withdrawing tax free in retirement. IRA’s have annual contribution limits, but also have “catch up” contribution benefits for those over age 50. Visit this post from NerdWallet to see the current contribution limits and catch up contribution benefits for 2020.

Contributing to your employer retirement plan (401k or 403b) and maxing out your contributions there first should be the priority. Why? To take advantage of any matching bonuses they offer. Once you have maxed out your employer retirement plan, begin working on maxing out your IRA contributions and catch up contributions as much as possible.

Tip #3: Understand The Investment Vehicles Available To You

Choosing what to invest in can be the hardest part of planning for retirement. Remember the bonus tip mentioned at the beginning, keep it simple! The easiest way to do this is to determine how much risk you are willing to take, and invest accordingly.

In general, stocks are more risky and bonds are more conservative. If you are a moderately OK with taking risk, you might allocate 60% of your portfolio to stocks, and 40% of your portfolio to bonds. Here are the different investments available to you:

Stocks:

Purchasing stocks is buying a share of ownership in a company. If that company grows, so will your investment. If you invest in individual stocks, you should do thorough analysis on each company, and have a portfolio of at least 10-20 different companies to appropriately diversify.

Bonds:

Purchasing bonds is like playing the bank for businesses and government entities. When money is needed, often a business will issue a bond that pays a percent return (interest) on the money you lend. Bonds are generally much less risky, in that they pay a regular return on interest and are not as volatile as stocks.

Mutual Funds:

Adding money to a mutual fund is like giving your hard earned money to professional managers of the fund who then invest your money for you. Each mutual fund has an investment objective, such as growth, income, or preserving capital, etc. As you plan for retirement, investing in a mutual fund with a good track record and an appropriate risk tolerance for your situation can be a great option.

Exchange Traded Funds ETFs:

Exchange traded funds are very similar to mutual funds, but they trade on the stock market like individual stocks do, whereas mutual funds you simply contribute to and the managers invest your money accordingly. When you purchase an ETF, you are purchasing a basket of stocks all at once. You can invest in ETFs based on industry, markets, and even risk tolerance.

Real Estate:

Real estate can be a great investment for passive income in the form of rent payments from the real estate renters. You can invest in real estate by purchasing your own investment properties and renting them out, or like a mutual fund, buy into a Real Estate Investment Trust (REIT) where the fund manager takes your money and invests and manages real estate properties for thousands of investors.

Other Considerations:

These are, by no means, all the retirement tools at your disposal, and we wanted to make sure you don’t forget the government benefits you are entitled to. Social Security should definitely be included in the financial considerations, and Medicare is a necessity in your long-term health care picture. Each of these, albeit a given (for the time being) will impact your decisions and should be included in all your planning.

Final Thoughts

The way you invest your money is totally dependent on how much risk you are willing to take. When you are in your 50s, you have approximately 15 years until the money is needed, thus if you are OK with volatility in your portfolio value, you can be comfortable your overall return will be higher. However, as you approach closer to your retirement age, you may wish to begin investing more conservatively to ensure you don’t lose your principal as retirement is approaching.

We hope that the information in this blog can help you make an informed decision. As always, if you don’t see something here that you want, feel free to contact me directly through our Contact page or leave a comment below, we read every one! All the best ~ Glen.