Age 50 is a great place to check that your retirement is on track. It isn’t too late for any adjustments to set things right. Below are several tips to ensure you’re meeting your retirement goals.
Maximize Employer Match
Simply contributing to your employer sponsored retirement plan will often trigger the employer match. But there is usually a default contribution set just to make sure employees are saving for retirement. Freedom Financial notes that there are a couple of disadvantages to leaving your contribution set at the default.
One is that it won’t be enough for retirement. “For a lot of people, that is not going to be enough,” says Michele Clark, a certified financial planner for Clark Hourly Financial Planning in Chesterfield, Mo. “When you get a raise, save 1 percent more every year until you can get up to hopefully 20 percent of your pay.”
Another disadvantage is that the default contribution amount often isn’t enough to maximize the full employer match. To make sure you are receiving all of the benefits of the employer contribution match, increase your retirement contributions up to the maximum allowed by the match.
Freedom Financial says that a common rule of the thumb to figure out your portfolio allocation is to subtract your age from 110. That will give you the percentage of equities you should be invested in.
For example, if you are 50, you should be invested 60% (110 – 50) in equities and 40% in bonds. The 110 rule is just a rule of thumb. Depending on your risk tolerance, you might have more in equities.
Jack Bogle, founder of the Vanguard Group, had this to say about his allocation mix, “You don’t want to abandon stocks; you just want to get something you can live with comfortably. I’m 50 percent stocks and 50 percent bonds, and I spend half my time worrying about why I have so much in stocks and so little in stocks.”
Fees can greatly eat into your retirement savings. Freedom Financial asks when is the last time you took inventory of the percentage fees charged for each fund your invested in?
“Some 401(k) investments have very high costs, and you should pick the lowest-cost investment in your 401(k) plan that also matches you risk tolerance,” says Carolyn McClanahan, a certified financial planner for Life Planning Partners in Jacksonville, Fla. “If it’s a high-cost 401(k) plan then maybe consider saving in an IRA instead of the 401(k) after you get the match.”
Is Your Insurance Policy Still Relevant?
The insurance policy you took out to insure the kids had money for college and the family had income in case something happened to you is probably no longer relevant. The kids have now all finished college, moved out and now it is just you and your spouse.
It’s time to re-adjust your insurance. Since you still have 15 or so years to go, a policy covering only your spouse is probably all that is needed.