By the age of 50, most people are feeling the effects of a lifetime of hard work and are looking forward to their vision of retirement. Whether yours includes quiet mornings spent fishing, world travel, or some other picture of serenity, the decisions you make and the plans you lay from the age of 50 forward are critical to achieving the retirement you want.
We talked with thought leaders in the financial field to get their take on the most important questions people over 50 face, and how you can set yourself up for retirement success.
Number 1: When Can You Retire?
“I think the most important decision facing people over 50 is when they can retire,” says Jon Neal, founder of Neal Group LLC. “Hopefully at this point in life the kids are through college and the mortgage is almost paid off. If they have saved little or nothing for retirement they are in for a shock when they look at how they will live in retirement and discover they have to work until they are 70!”
Kay Bell is the author of The Truth About Paying Fewer Taxes (FT Press, 2009) and writes the award-winning Don’t Mess With Taxes blog. Rather than a firm retirement date, she offers a gradual approach. “You don’t want to quit work and then find that you desperately need that money. If you’re in decent financial shape, it’s a good time to think about transitioning. Can you work part-time? Is there work you want to do other than your current job, such as consulting or even changing careers to a field, e.g., carpentry, that you’ve enjoyed as an avocation? Look into the financial and practical possibilities of doing that.”
Ramona Jar is a self-taught web designer and personal finance blogger. She and her husband also plan for an active retirement. “We are both thinking about how to better prepare for our golden years and even have at least one business up and running. We are workaholics, so I don’t think we’d retire entirely. Sure, our business needs to be something relaxing and nice, otherwise it would not be something we can do or enjoy. If health would permit, I’d probably work even into retirement, at least for fun and some side income.”
Number Two: What About Debt?
Calvin Harris Jr,, CPA, is the Founder and Chief Executive Officer of Harvin Consulting. He points out an obvious truth that manages to elude many: less debt equals more income. “A person over 50 will ideally have less debt than their younger counterparts. While retirement could still be as much as two decades away, having a strategy to lower debt after 50 will allow retirement to include more income since there is less debt to carry.”
Jon Neal warns that people in their 50s often let debt shove back your retirement. “Ideally they will not have any debt. The mortgage will be paid off as well as their cars. Since this is not reality, I would suggest that whatever debt they have will be paid off in the next five years if they are in their 50’s. Too often I see what I call delayed gratification. They sacrificed to put the kids through college, lived in a small house and drove old cars. Now, it’s time to live! They go overboard and forget about retirement.”
As you pass the age of 50 and the kids are raised, it’s easy to live–and spend–in the moment. Think twice before you give in to those temptations. The debt you don’t take on today will be money in your pocket for the golden years.
Number 3: How’s My Credit?
Many people view getting and keeping a good credit rating as a young person’s challenge. But Todd Christensen, author of Everyday Money for Everyday People, stresses the ongoing need for solid credit. “There are still large numbers of folks over 50 who currently need, or in the future will need, credit. To explain why, let’s first understand this important reality: credit is used for more than just borrowing money. While we associate good credit with better lending terms and a higher likelihood of getting approved for a credit card or car loan, there are many reasons why people over 50 should continue to care for (or build) their credit rating.”
Christensen, who also serves as the Director of Education at the National Financial Education Center at Debt Reduction Service Inc., notes how expenses for things you will still need in retirement like utility deposits, rent rates, cell phone contract charges, and car insurance are considerably lower for people with strong credit.
John Dillard is the president at HIS CPA, a firm in Georgia that offers virtual financial management services to small and medium businesses. He agrees that good credit is essential, but warns against using it to leverage a lifestyle. “There will be many times in your life that you will absolutely need to use credit as a tool, such as in buying a home. But you should never use more than you need, and you should always use less credit than others are willing to grant. Financial crises from job loss to the economy will always occur. Therefore it is essential and critical that you are sure to live well below your economic needs. Only in that way will you be able to weather the storms of monetary uncertainties.”
Less can be more. The credit lessons you probably learned as a young adult will still apply for your retirement years!
The Next Steps on Your Voyage to Retirement
As the thought of a finish line for your career grows closer, it’s more important than ever to be disciplined and keep your eyes on the retirement prize. Use your 50s to pay down your debt, carefully consider your credit choices, envision hobbies that have a potential to pay off, and keep a close eye on your investments. You’ve come this far. By following the advice of the above pros and staying focused now you can reach your dream of a satisfying retirement sooner rather than later.