When you reach your 50s, you can no longer afford the illusion that retirement is some far-distant concern for another day.
You need laser focus on long-term financial planning. Because in most cases, you have more working years behind you than ahead.
It’s time to map the decades ahead in precise detail — and how to pay for them. Here are the smart money moves you can make when you reach your 50s.
Credit and Debt
By your 50s, your credit score and ability to borrow start taking a backseat to your ability to pay down your debts in preparation for retirement.
1. Pay Off All Unsecured Debts
If you still have any unsecured debts, such as personal loans, credit card balances, or student loans, it’s time to pay them off once and for all.
Use the debt snowball strategy to knock out high-interest debts one by one. With each debt you pay off, you’ll have more money each month to put toward the next debt.
In the meantime, make sure you don’t add any fresh debt. If that means cutting your credit cards in half or locking them in a safe, so be it. Try the envelope system if you struggle with budgeting.
Whatever it takes, ditch your unsecured debts, and start paying off your credit card balances in full each month. You simply can’t build wealth efficiently while paying double-digit interest on consumer debts.
2. Start Thinking About Paying Off Secured Debts Too
Secured debts, such as an auto loan or home mortgage, come with lower interest rates. That makes eliminating them a lower financial priority.
By paying off a debt, you effectively earn a “return” equal to the interest rate you were paying on it. If you pay off a car loan at 5% interest, you earn the equivalent of a 5% return on the money you put toward paying it off early.
Younger adults can make a strong case for investing their savings in the stock market for an average return of 10%, rather than paying off their secured debts early to save 3% to 5% on interest.
But as you approach retirement, you have less tolerance for risk. The calculus starts shifting in favor of the guaranteed return from paying off debt, rather than the volatile returns and risks inherent in the stock market.
Ultimately this comes down to your own risk tolerance. A 50-year-old with a high risk tolerance may leave their secured debts in place and keep funneling money into the stock market. A cautious 59-year-old can sleep better at night by becoming debt-free. Neither is wrong — do what’s right for you.
As a compromise, consider arranging biweekly payments for your auto loan or home loan. Set up half-month payments to go out every two weeks, to make 26 half-month payments per year (the equivalent of 13 months’ payments). You won’t notice the difference in your budget, but you’ll pay down your loan balance faster.
Every adult needs financial safety nets, regardless of their age. But the details shift as you get older and your needs change.
3. Check Your Emergency Fund
Ideally, you should have between three and six months’ living expenses set aside as an emergency fund.
Why such a wide range? Because your target depends on your financial stability — in particular, the stability of your income and your living expenses.
A W-2 employee with an ironclad government job and almost no risk of losing it needs less money in their emergency fund than a self-employed artist whose income fluctuates wildly. Likewise, a person who spends almost exactly the same amount each month needs less than their neighbor whose expenses vary up and down.
Assess your own financial stability, and decide how much you need set aside as a cash cushion.
4. Reassess Your Health Insurance
But as you get older, your health risks rise. The combination of an HSA and a high-deductible health plan might still make sense for you, but your 50s are a good decade to reassess your health insurance and consider moving to a higher-premium, more comprehensive health plan.
Bear in mind that part of the decision comes down to risk tolerance. There isn’t necessarily a right or wrong approach, as long as you can sleep at night and wouldn’t be bankrupted by a health emergency.
5. Reconsider Life Insurance
People with dependents need life insurance. It makes sense for single-breadwinner households and for families heavily reliant on one partner’s income.
By your 50s, however, your children may have already moved out of the nest. Your spouse may be able to get by financially if you were to kick the bucket, between their income and your existing nest egg.
Which means you may not need life insurance anymore.
Review your household finances and decide whether that life insurance premium wouldn’t serve your family better invested for retirement.
6. Reconsider Long-Term Disability Insurance
On the one hand, the same logic applies to disability insurance. If your children have moved out you may not need it the way you did when you had more dependents.
On the other, as an older adult, you’re more likely to suffer a health handicap. And depending on how close you are to financial independence, you might not be able to afford the lost income at this stage in your career.
Skipping out on disability insurance ranks among the many hidden benefits of pursuing financial independence at a young age. The more money you save and invest, the less you rely on your day job to pay the bills.
Talk to a financial planner about whether to discontinue your disability insurance — or double down on it.
Lifestyle and Budget
As your children age out of your family home, your 50s offer an opportunity to reevaluate everything from your housing to your career to your budget.
Don’t keep coasting. Take some time to give your remaining decades the thought they deserve.
7. Look at Your Lifestyle in a New Light
If you don’t absolutely love your work, the neighborhood and city where you live, your hobbies, or your home and commute, it’s time to make a change.
Enter: lifestyle design. Too many adults simply go through the motions, living in the same town where they grew up, working a job they stumbled into, and otherwise drifting along with life’s current.
Then look into all the incredible places you could live on this planet, such as inexpensive countries where $2,000 per month buys the good life.
My family and I live in Brasilia, where I set my own hours. Before that, we lived in Abu Dhabi. You can design your own ideal life, but it requires some intentionality on your part.
8. Talk to Your Parents About Their Plans
If you’re lucky enough to still have your parents, sit down with them to discuss their plans for housing and care. You might get lucky, and they’ll live independently for many years to come. Or they may need considerable care.
Talk through the implications of them aging in place, and whether they can afford live-in care if needed. Discuss contingency plans, such as them coming to live with you or another sibling if needed. And don’t avoid talking through the circumstances under which they’d move into a long-term care home.
A study by Care.com found that almost one-third of Americans end up providing financial help to their parents. It marks one more reason why you need to save and invest more money than you think.
9. Reevaluate Your Housing
That large suburban home may have been just the right size for a family of four or five. But as your kids move out, do you really need a three-, four-, or five-bedroom house?
Remember, your housing costs don’t end at your rent or mortgage. They also include maintenance, repairs, lawn care, utility bills, and more. You could save considerable time and money across the board by downsizing.
Or better yet, find a way to house hack. By slashing or eliminating your housing payment, you can supercharge your retirement savings. For that matter, you won’t need to save as much for retirement if you don’t have a housing payment to cover!
You don’t need to keep paying a huge mortgage and oversize utility bills each month just to house your grown kids’ old toys and junk. Have your kids clean them out the next time they’re visiting, and stop wasting so much time and money maintaining a family-size home if you no longer need it.
10. Get Aggressive With Budgeting
It’s official: You’re on the clock for your retirement investments.
And you may not have as much working time left as you think, either. Nearly two-thirds of workers over 50 have been forced to quit or pushed out of a job before they wanted, according to a joint study by ProPublica and the Urban Institute.
Save more money, and take advantage of higher catch-up contributions to your tax-advantaged accounts to streamline your tax savings.
Create a new budget from scratch in Google Sheets or with Tiller, and overhaul your spending on budget categories across the board. You may have gotten away with loose personal finances to date, but that luxury disappears as retirement looms larger on the horizon.
11. Protect Your Brain and Physical Health
When your physical health or brain health suffers, your finances suffer.
Aside from higher medical bills, poor health can boost your health insurance premiums, and make it far more difficult to find and keep high-income jobs. And brain health problems can cause cognitive declines that make it harder to continue working or managing your own finances.
If you don’t work out at least three or four times a week, start now. Lose weight, build strength, and extend your life expectancy along the way. By doing so, you can also increase your odds of continuing to work and earn money well into your 60s or even 70s.
Career and Income
Hopefully, you’re earning more money than ever while in your 50s. But that won’t last forever.
Start thinking about your remaining career now, to make the most of it both financially and personally.
12. Map Your Remaining Career
That statistic from the Propublica and Urban Institute study is a chilling one. Among the older workers pushed out of their jobs, many took a deep pay cut when they eventually found work again. Some never did find work again and ended up fizzling into an unwanted early retirement by default.
Don’t let that happen to you. Give some thought to how you want to spend your remaining career. That might include pursuing new certifications, new contacts, even new degrees. It’s never too late to make a career change, so bring that intentionality and lifestyle design to bear as you map out the next decade or two of your career.
13. Consider a Second Act After Leaving Your 9-to-5 Job
I plan to work in some capacity forever — despite also planning to reach financial independence at a young age.
Forget about the old model where you go from working full-time to sitting on the couch watching network news all day. Instead, consider a post-retirement job or gig that brings you fun, fulfillment, and some money to boot.
My mother tutors children, which combines flexibility with a high hourly rate. Some people work at nonprofits to further a cause while earning an income. I plan to keep writing after reaching financial independence and maybe pour wine at a local winery for good measure.
For that matter, you may be able to simply scale back your existing job. I know a woman who transitioned from working five days per week to three, and while her salary took a hit, she retained her benefits.
After looking at your finances, you may even decide that you’ve reached barista FIRE already, and can afford to quit your high-octane day job and simply work a laid back or more fulfilling job for your remaining career.
Investing and Planning
Retirement savings, investing, and planning remain a dominant theme throughout your 50s.
Get comfortable with the numbers and concepts, because in today’s world, you’re responsible for your own retirement.
14. Get Clear on Your Retirement Goals
Start with two simple questions:
- How much do I need to set aside for retirement?
- When do I want to retire (or reach financial independence)?
The first question depends on your projected annual spending in retirement. If you don’t know how much you plan to spend each year after retiring, get clear on that figure.
Remember you won’t have expenses like a commute, work clothes, or work lunches. For that matter, you and your spouse will probably be able to share one car, and depending on where you live, may be able to go carless.
You might be able to move out of an expensive city where you work and into a lower-cost area. Or you could lower your cost of living by moving overseas. Go back and give a second look to those countries where you can live comfortably on $2,000 per month!
The less you need, the sooner you can retire. Which raises the second question of when you want to reach financial independence, able to live entirely on your nest egg.
For a deeper dive into these two questions, read up on retirement planning strategies.
15. Boost Your Retirement Account Contributions
First, make sure you take full advantage of employer matching contributions toward a retirement plan. It’s something every employee with the option should do, regardless of their age, because it’s effectively free money.
Beyond that, budget as much money as you can toward tax-sheltered retirement accounts. Remember that over age 50, you can contribute an extra $1,000 per year to IRAs and $6,000 per year to 401(k) or 403(b) accounts as catch-up contributions.
Even if you plan to retire before age 59 ½, you can and should incorporate tax-sheltered accounts in your early retirement strategy.
16. Consider Roth Conversions
As a quick recap on traditional versus Roth IRAs, you can deduct contributions on traditional IRA contributions this year, but you pay taxes on withdrawals in retirement.
Roth IRAs work the opposite way — you don’t get a tax break this year, but the money compounds tax-free, and you pay no taxes on withdrawals in retirement.
Tax-free withdrawals from Roth IRAs work out well if you suspect your taxes might go up in retirement. And there are many reasons they might, so you may want to consider moving money from your traditional IRA to a Roth IRA.
Known as a Roth conversion, you pay taxes this year on the money you move from your traditional to your Roth IRA. But then the money starts compounding tax-free, and you don’t have to worry about those taxes in retirement.
That, in turn, lowers the amount you need to save for retirement because it all ends up in your own pocket and not Uncle Sam’s.
17. Reevaluate Your Advising Needs
But many 50-somethings see their net worths grow into seven digits, and need a hybrid advisor or human investment advisor. They start looking for the bells and whistles like tax-loss harvesting and customizing their portfolios beyond what automated robo-advisors allow.
If you’re nearing or already in the two comma club, consider switching to a human hybrid advising model to customize your investments and optimize your taxes on them.
18. Put Your Children Second
Too many parents put their children’s college education costs over their own retirement savings.
Get very clear on this: Your children have dozens of ways to pay for their college education. You have just one way to ensure a comfortable retirement, and that’s your nest egg.
That doesn’t mean you can’t or shouldn’t help your kids at all. But your retirement savings must come first.
If you have children approaching or at college age, you can get creative with ways to help them with their tuition. Only if your own retirement is on track though, because it’s your children who will bear the burden of caring for you if you run out of money in retirement.
19. Start Thinking About Sequence Risk
In the early years of retirement, retirees face a unique risk known as sequence of returns risk. The short explanation is that a stock market crash early in your retirement could prove ruinous to your nest egg, and it may never recover.
That’s why conventional wisdom suggests you start moving money from stocks toward bonds as you approach retirement. Bonds come with lower volatility and more certain returns — if lower ones, in today’s low-interest environment.
To play it safe, speak with your financial advisor about sequence risk. Alternatively, try these less traditional ideas to reduce risk without gutting your returns:
- Subtract Your Age From 120. That’s the percentage of your asset allocation you should keep in stocks. Don’t go below 60%.
- Look to Tax-Free Municipal Bonds. You get low risk combined with higher effective returns, given the tax savings.
- Swap in Some Real Estate for the Bonds. Explore passive, indirect ways to invest in real estate. I particularly like real estate crowdfunding investments such as Fundrise,Streitwise, and GroundFloor.
You don’t want to get caught flat-footed by a stock market crash the day after you retire. But you also don’t want to accept returns that barely beat inflation. Find a balance that works for you, and when in doubt, get expert advice.
20. Plan for Long-Term Care
More than half (52%) of adults who reach age 65 will need long-term care at some point in their remaining lifespans, according to AARP.
In other words, you can’t ignore the possibility that you’ll need it. And it’s not cheap, however you approach it.
Personally, my “Plan A” is to age in place, and bring in a caregiver if the day comes when I can no longer care for myself. My next contingency plan involves moving in with my daughter and helping out financially. As a last resort, I’ll move into a long-term care facility.
You can get more creative with your plans, such as bringing in a younger housemate at a reduced rent who helps out with chores around the house and serves as another set of hands and eyes. That can work well before you need care, but not after.
Alternatively, you can move overseas for cheaper living and care costs. There are also taxpayer-funded low-income care facilities if you get desperate.
Whatever your plan, make sure you have one, and make sure you have some extra money set aside in case you need it.
21. Update Your Estate Plan
Dust off your last will to make sure it’s up to date. Does it include all your current assets? Do you still want your money distributed the same way? What about any minor children and pets?
If you don’t have one, create it now. Try Trust & Will as a simple but effective online option.
If you’ve accumulated some wealth, you may want to create a trust to continue growing, managing, and distributing your assets long after you shuffle off this mortal coil.
Don’t be afraid to get expert help from an estate planning attorney. While you’re at it, ask them about the most tax-friendly way to distribute your assets to your heirs after you depart.
22. Track 3 Numbers Every Month
Spend 10 minutes each month tracking three simple numbers. That which gets measured gets done, after all.
To begin with, track your savings rate. This is the percentage of your income that you put toward savings, investments, or paying down debts early. The higher your savings rate, the faster you build your net worth.
Which raises the second number to track: your investable net worth. I exclude home equity when calculating net worth because it can create the illusion of wealth, but it exists only on paper until the day you sell your home.
Lastly, track your “FIRE ratio.” While it sounds complex, it’s simply the percentage of your monthly living expenses that you can cover with passive income from investments. When it reaches 100%, you’ve reached financial independence and can retire early (hence the acronym FIRE).
Keep an eye on these three numbers each month, and you’ll be pleasantly surprised at how quickly you build wealth.
Aside from the ever-present focus on saving for retirement in your 50s, start putting thought into what your life will actually look like after you retire. Or, as the case may be, after you ditch your current high-stress career for a fulfilling second act.
As you look into ways to reduce your living expenses, you might find that you don’t need as much money as you previously thought in order to retire. Especially if you work a post-retirement gig that provides fun and fulfillment — on your own terms.