The Financial Checklist for Your 50s (Part 1): Building the Foundation for Retirement
Written by Richelle Hofer
Is it possible that your 50’s are the best decade of your life? The kids are growing up and maybe leaving the house. You’re likely making more money than you’ve ever made at any other point in your career. The house is getting close to being paid off. After spending years of pinching pennies, cutting coupons (remember when we actually had to do that?), running kids to sporting events, and climbing the corporate ladder, life in your 50’s seems a little bit easier.
And we earned it! Our 20’s, 30’s, 40’s… it was a lot! But we made it!
For years the idea of retirement felt like some mirage in the desert… some blurry, out of reach concept. But now here we are and retirement is coming fully into focus.
For a minute it sounds awesome, but then it starts to sound scary! Have we done enough? Have we saved enough? What do we need to start doing today to prepare?
The good news is that preparing for retirement doesn’t mean selling everything, living on ramen noodles, or giving up everything you enjoy.
But your 50s are the perfect time to start putting the pieces together while you still have time to make adjustments if you need to.
Here’s the checklist we encourage people to work through before retirement. Not because you have to do everything perfectly—but because each of these decisions has the potential to make retirement a little less stressful and a lot more enjoyable.
1. Start Thinking About Retirement Income—Not Just Retirement Savings
For most of your working life, retirement has been about one thing: saving as much as you can.
Contribute to your 401(k). Build your IRA. Watch the balance grow. Repeat.
And for a long time, that’s exactly what you should have been doing.
But now the conversation needs to change a little. Instead of asking, “How much have I saved?” it’s time to start asking a “How will this money eventually become my paycheck?”
While you’re working, your investments have one job—to grow. Once you retire, they have a much bigger job. They need to help create an income that supports your lifestyle for the next 20 or 30 years.
And chances are, that income won’t come from just one place.
For many retirees, it comes from a combination of:
- Social Security
- IRAs and 401(k)s
- Roth IRAs
- Investment accounts
- Pensions
- Rental properties
- Farm income
- Part-time work or consulting
Each of those pieces has its own rules. They’re taxed differently. Some are more flexible than others. Some are guaranteed, while others depend on market performance.
The goal isn’t just to accumulate the biggest nest egg possible. The goal is to coordinate all of those income sources in a way that gives you confidence. That’s why retirement planning isn’t just about investments anymore. We have to figure out who to build a paycheck after the paycheck stops.
2. Start Paying Attention to What You Actually Spend
This may be the single most important step you can take before retirement.
One of the first questions we need to answer before we can build a retirement plan is:
“How much money actually leaves your accounts each month?”
Notice I didn’t ask, “What’s your budget?”
Many of the people we work with have never lived by a strict budget. And honestly, I don’t think retirement is the ideal time to start.
If getting your nails done every month makes you happy, you don’t want your retirement plan to tell you to stop. If you love taking your grandchildren to the zoo, golfing on Fridays, or going to the beach each year, those things shouldn’t automatically disappear just because you stopped working.
If retirement means you can’t do the things you enjoy, that doesn’t sound like a great retirement at all!
But we do really have to know how much you’re spending on those things in order to build the plan. Here’s a great way to get a realistic idea of what you’re actually spending.
Over the next several months (a whole year is best), look at your checking account and credit card statements and ask:
- How much money actually leaves my accounts each month?
- Are there expenses that will naturally disappear in retirement?
- Are there new expenses I expect to add, like travel or hobbies?
A lot of times people want to start “excluding” things from their transaction list. They’ll say things like “well, this was a one-off expense” or “I won’t do this when I retire”. This isn’t about judging your spending. It’s about understanding it. And honestly, you’re not very likely to change spending habits that you’ve developed over the course of many years.
Because if we don’t know what your lifestyle actually costs, it’s almost impossible to know whether your retirement savings can support it for the next 30 years.
One of my favorite moments in a planning meeting is when a client sheepishly says, “I suppose I should stop spending money on…” and then mentions dinners out, golf, quilting supplies, or monthly spa appointments.
My response is usually the same:
“Why?”
If those things are important to you and your retirement plan can comfortably support them, then they’re not a problem—they’re part of the reason you worked so hard in the first place.
The goal isn’t to build a retirement around deprivation. The goal is to build a retirement around your life.
3. Take Advantage of Catch-up Contributions
One of the nicest gifts the IRS gives people in their 50s is something called a catch-up contribution.
It exists because life happens.
Maybe your kids were expensive. Maybe you were paying off a mortgage. Maybe you were building a business. Whatever the reason, many people reach their 50s and realize they aren’t quite where they’d hoped to be with retirement savings.
The IRS recognizes that (isn’t that nice of them?).
Once you reach age 50, you’re allowed to contribute more to many retirement accounts than younger workers can. Those additional dollars are called catch-up contributions, and they can make a meaningful difference over the last 10 to 15 years of your career.
One thing we see fairly often is someone who says,
“I’m already maxing out my 401(k).”
When we dig a little deeper, what they really mean is they’re contributing enough to get the company match.
Those aren’t the same thing.
Getting the employer match is a fantastic start but it usually isn’t the maximum amount you’re allowed to contribute.
If your cash flow allows it, your 50s can be an excellent time to increase those contributions. Every additional dollar has years to grow, and many people are finally in a financial position where increasing savings doesn’t feel quite as painful as it did when they were raising kids.
4. Make Sure Your Investments Still Match Your Life
One of the biggest mistakes people make in their 50s isn’t picking the wrong investments. It’s forgetting to ask whether the investments they chose years ago still make sense today.
Think about where you were ten or twenty years ago. Maybe you were raising kids. Paying off a mortgage. Building a business. Retirement felt so far away that you didn’t think much about what would happen once you stopped working.
Now things are different and retirement is becoming real.
That doesn’t mean you should suddenly move everything into cash or become overly conservative. In fact, many people will spend 25 or 30 years in retirement, so a portion of their portfolio still needs to grow.
But it does mean it’s a good time to ask a few important questions.
- Am I taking more risk than I actually need to?
- Do I understand what I own and why I own it?
- If the market dropped 25% next year, would I still feel comfortable retiring?
- Is my portfolio built for the accumulation stage of life, or the distribution stage that’s coming next?
Those are very different questions than the ones you were asking in your 30s and 40s.
Often we see portfolios that haven’t really changed in years. Maybe they’ve been automatically contributing to a 401(k), or maybe an advisor set the investment allocation a decade ago and it has simply been left alone.
There’s nothing wrong with that—until life changes. Your investments should evolve as your life evolves.
That doesn’t necessarily mean making dramatic changes. Sometimes the right answer is to stay the course. Other times, a few thoughtful adjustments can better prepare your portfolio for retirement.
The important thing is that your investment strategy reflects where you’re headed not just where you’ve been.
The Bottom Line
If you’re in your 50s, here’s the good news: you don’t have to have everything figured out today.
In fact, if you’ve made it this far, you’re probably doing better than you think.
Your 50s aren’t about scrambling to “catch up.” They’re about making intentional decisions while you still have time for those decisions to make a meaningful difference.
Start by understanding where your retirement income will come from. Pay attention to what your lifestyle actually costs. Take advantage of opportunities to save more while you’re still working. And make sure your investments are positioned for where you’re headed not just where you’ve been.
None of these steps require you to panic. They just require you to prepare.
In Part Two of this series, we’ll tackle four more areas that become increasingly important as retirement gets closer: taxes, Social Security, estate planning, and long-term care. They may sound intimidating (ugh!), but with a little planning, they don’t have to be.
Retirement isn’t built on one big decision.
It’s built on a lifetime of thoughtful ones.
Disclosure
This article is provided for informational and educational purposes only and should not be construed as personalized investment, tax, legal, or financial planning advice. Every individual’s financial situation is unique, and the strategies discussed may not be appropriate for everyone.
Examples and scenarios are hypothetical and are intended solely to illustrate financial planning concepts. They do not represent the experience of any specific client or guarantee future results.
Investment advisory services are offered through Impact Wealth Management, a registered investment adviser. Registration does not imply a certain level of skill or training. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.
Before making financial, investment, tax, or estate planning decisions, consult with your financial advisor and other qualified professionals regarding your individual circumstances.