How To Start Planning For Retirement At 50: 10 Tips

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How to start planning for retirement at 50
Article Overview

Can I Start Saving For Retirement At 50?

The answer is a resounding YES.

50 may seem late in life but it is not too late. At that age, if you combine full-time and part-time jobs with side gigs of 15 to 20 years, you can build a self-sufficient retirement fund that will last you for your post-retirement days. Once you realize your disadvantage, which is the age at which you are starting, you need to first, perfect the basics. That is, draw up a budget and savings plan, and stick to it. Cut down on unnecessary expenses and start being prudent with your income. Stop taking debts and ensure you create a plan that helps you pay all debts before retirement, including your mortgage. These are key moments in the next two decades after you clock 50. There is no limit to the age you can start building your retirement savings, you only have to work much harder than a younger person.

How To Start Planning For Retirement At 50: 10 Tips

1. Start A Budget That Prioritizes Retirement

Retirement is an important part of financial planning that ensures your post-retirement days are financially catered for. If you have clocked 50 and yet to have a retirement plan, don’t fret, it is never too late to start a retirement saving account. When you decide to start making contributions to your retirement savings account, one of the first things to do is to make a budget that puts your retirement funds in the driving seat. These will ensure that contributing to your retirement savings account becomes a priority.

To do this, you must take a look at your monthly income and expenditure and plan what you spend and what you save. A budget must be realistic so much so that what you set aside for expenditure must sufficiently cover paying for your required expenses like insurance, mortgage, utility and personal bills, clothing, and food. You must cover the essentials first before you start thinking of saving. After settling this, you must then assess your optional spending. These are expenses that you can cut down or do away with such a seating out, going on vacation at every opportunity, credit card debts and others. The money used to fund these optional expenses can be diverted into your retirement savings account.

It is important to avoid credit card debt in this situation because it is what prevents you from achieving your financial goals. The trick is that you do not put anything on your credit card that you cannot settle within the same month. This way you can avoid paying interest when you start paying back monthly. Ensure that you settle all debt in the same month you borrowed them. This means that you have to assess your potential debt before borrowing it. Stick to this, you will have more money to put into your retirement savings.

2. Start Automatic Savings

Automatic savings is a sign of discipline that will help you control your savings and ensure that you keep up with your commitment monthly. For this to work, you must have reviewed your budget to cut down on all unnecessary expenses. This will ensure that your basic needs are covered and your assigned savings percentage is automatically deducted from your account into your retirement savings account. If you have a stretched budget that saps out all your funds, then this plan may not succeed.

Indeed, you cannot control how long you live but an average50-year-old is expected to live another 30 years. So ensure that you make your retirement plans to cater for the next thirty years. Get your calculations right, consider inflation and you are covered during your post-retirement days. Have a budget for expenses and savings and make sure you stick to it.

3. Generate More Income ‍

At 50, you do not have much time before retirement and this should be a motivation for you to generate as much income as you can to meet up with your retirement planning goals. The idea is to have more income so that you can save more and prepare for your retirement. There are so many smart ways to go about this. First, you can ask for a raise at your current job or work towards higher bonuses and commissions or you can even start working overtime to earn more. You can learn digital skills that will also fetch you money. In all of these, it is important to know how you can reduce your taxes with your additional income. You can even sell or rent out some of your unused belongings.

4. Prepare To Work Longer Than You Originally Planned‍

If not for any reason, for the fact that you just started your retirement plan at 50. It is an advanced age that you may not be able to save enough for retirement. This means that you have to start thinking outside the box to meetup with your retirement planning goals. One of such ways is to work longer even after your retirement age. The longer you stay working, the more you earn and the better your retirement savings. Working extra years will help you defer dipping into your retirement savings and keep just for a little while longer for it to grow and be sufficient for when you finally retire.

5. Pay Your Debts

Debt is one of the hindrances to having a desired retirement savings plan. If you won a credit card, there is every likelihood that you have debts. Discuss with your financial advisor on ways you can pay your debts as soon as you can while also building your retirement savings portfolio. If you have a mortgage, create a plan for you to settle it all before you finally retire. It will not be good if your retirement earnings are used to pay up debts. Once you can settle all these debts, ensure that you do not go back into that rabbit hole called debt again. If you must, ensure that it is a debt you can pay up in the same month it is owed.

6. Have Diversified Investment Portfolios

Investment is one of the key ways of ensuring that your retirement savings multiply. A diversified investment portfolio simply means that you do not have all your investments in one area. In other words, your investment portfolio includes stocks, bonds, real estate, cryptocurrency, and many more. A diverse investment portfolio helps your hedge the risks of each portfolio against one another and ensure that you do not lose all your savings if one of the investments is not performing as it should. Each investment portfolio acts as a fail-safe to the others.

However, do not invest in fixed income assets that yields less than the average expectation that can be compared to the expected inflation rate during post-retirement years. The general inflation estimate is2%. In other words, ensure that your investments yield more than 2% to cover for inflation. Stocks are very good investments that yield incomes more than the estimated inflation rate. Cryptocurrency is high risk but can be rewarding on good days. Whatever investment you are going into, try and play safe as much as possible and be sure that the earnings are more than the inflation rate.,

Another trick for a diversified investment portfolio is when you are approaching retirement, you can divide your retirement savings into pockets, 3 to be precise. the funds in each pocket will be designated to be spent for the next 30 years, 10 years each. You can then invest the money for the first 10 years in conservative portfolios like bonds, and mutual funds, while the remaining 2 pockets can be invested in higher-risk investments like cryptocurrency and stocks. You can take the funds out of the investment when you are closer to needing the money. This will help you balance your investment risks in the different portfolios.

7. Have An Emergency Fund

Emergency funds will ensure that you do not dip into your retirement savings. There are times that the unexpected happens and you need money to cover the expenses, you do not want to dip into your retirement savings that are just gathering momentum. Having an emergency fund on the side can help you achieve this. Emergency funds can be in the form of savings, keeping a savings account, and having insurance to cover your home, car and health.

8. Have a Side Hustle

A side gig helps you cover the basic expenses and keeps you afloat while you save aggressively for your retirement plan. There are a lot of digital skills and remote jobs that you can take on that will help you achieve this.

9. Be Disciplined With Your Spending ‍

This is an important tip because it is what will ensure that you are on track with your retirement plan. When you create your budget, there will surely be temptations to spend above the budget. The key is to stick to your plan and plan for your future. You can break down your budget into weekly or monthly to track your expenses efficiently. Financial discipline is key in all of this.

10. Start Today

Starting a retirement plan at 50 doesn’t exactly give you a lot of time, but once you realize and accept that fact, you are 50% done. You still have a good 15 years of active work in you. That is a good amount of time to build a sufficient retirement fund. It is never too late, especially if you start today.

FAQ

A 50 year old should have at least $1.5 million to retire. This will keep a basic living standard in Canada and allow you to live through your retirement. 

If you are 50 and have no retirement savings, then you need to start investing as soon as possible, in addition to talking to a financial advisor to help you analyze how your retirement will happen. 

The best investment for a 50 year old will be a diversified portfolio of equity and fixed income stocks, in addition to alternative investments, held within a TFSA or RRSP. 

You should start saving for retirement at 50 in Canada by opening up a TFSA or RRSP and look at different options available. 

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Written by:

Jim Pan, CFP, MFA-P

Jim is a dedicated, fee and advice only independent Certified Financial Planner with a focus on supporting healthcare business owners during their crucial growth phase. His expertise lies in offering comprehensive solutions to minimize taxes while embracing a holistic approach. With a career spanning back to 2010, Jim has established a strong presence in the financial industry. He proudly holds a range of designations, including Certified Financial Planner (CFP), and Master Financial Advisor - Philanthropy (MFA-P). He is currently pursuing additional designations and qualifications to better serve his clients and community. Beyond his qualifications, Jim is a member and an esteemed participant in the Million Dollar Round Table (MDRT), an exclusive global association comprising the top 1% of financial advisors. Jim's commitment extends to the community, where he spearheads numerous charitable fundraising events and plays an active role in enhancing the well-being of others. Additionally, he has contributed significantly by serving on the board of the Canadian Mental Health Association in Vancouver. Currently, he volunteers with Junior Achievement of British Columbia (JABC) to present personal finance topics to youths.

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