In Your 50s: Making a Final Retirement

Savings Push

Many 50-somethings are feeling a lot better than they thought they would at this age. They’ve become more health conscious, they’re eating better and exercising more and this has prompted the mantra among many that “50 is the new 40.”

The same could be said about 50-somethings when it comes to their finances and saving for retirement. Many 50-somethings are in prime position to make a hard, final push to beef up their retirement accounts before they hit their 60s and start finalizing plans for exactly when and how they want to retire.

A Unique Opportunity

“Many individuals in their 50s have a unique opportunity to maximize their retirement savings during this last decade before they reach the traditional retirement age,” says Martin Walcoe, executive vice president with David Lerner Associates. “This is due to the fact that their children may have left the house, graduated college and struck out on their own; they may be in their peak earning years; and they can take advantage of catch-up contributions to their retirement plans.”

If you’re age 50 or over, you can make an additional catch-up contribution of $1,000 to your Individual Retirement Account (IRA) bringing the total maximum contribution up to $6,500. If you have a SIMPLE IRA or SIMPLE 401(k), you can make an additional catch-up contribution of $2,500 this year.

The news is even better if you have a 401(k), 403(b), 457(b) or SARSEP this year: You can contribute an additional $5,500 to these plans, bringing the total maximum contribution up to $23,000. If you and your spouse file your tax return jointly, together you can sock away up to $43,000 in these plans this year.

Meanwhile, if you own a small business or are self-employed, you can contribute up to $52,000 or 25 percent of your compensation (whichever is less) to a SEP-IRA.

Walcoe also points out that the tax advantages of qualified retirement plans may be greater for some 50-somethings if they are in their peak earning years. “The more money you’re making, the higher your tax rate will probably be — and the more benefit you may receive from a tax deduction.”

50-Something Challenges

Of course, not every 50-something finds himself or herself in this ideal financial scenario. In particular, many are part of the “sandwich generation,” still having to support children while also caring for aging parents.

According to a recent Pew study fifteen percent of Americans are providing personal care and/or financial assistance for at least one parent. If an individual has to leave the labor force to provide this care, the lifetime cost of doing so averages more than $303,000, according to a MetLife study (which factors in lost wages and Social Security benefits and the negative impact on pensions).

According to the Pew Research study roughly half (48%) of adults ages 40 to 59 have provided some financial support to at least one grown child in the past year.

While circumstances might seem to favor many 50-somethings when it comes to being financially prepared for retirement, many of them are not as confident in their retirement prospects as one might think they’d be. A TD Ameritrade survey determined that the average baby boomer has saved about $200,000 for retirement, but thinks he or she will need $750,000 to retire comfortably.

“The good news is that 50-somethings who don’t think they’ve saved enough for retirement yet still have time to pump up their savings,” says Walcoe. “But there’s no time to waste. Every month in which these individuals aren’t socking away as much money for retirement as they can is a month that cannot be recaptured.”

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. Member FINRA & SIPC