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Retirement Planning Around Age 50

By Justin Pritchard, CFP®

Your 50s are an excellent time to get serious about retirement planning. By this point in life, you know a lot about your preferences, you’ve learned lessons about spending and saving, and you might be in your peak earning years.

Retirement planning after 50 is also important because you might have more money saved than ever before, and there are a limited number of years left for you to earn income and add to your assets. Plus, if you raised any children, they may be independent at this stage (or getting close to independence).

But even if you don’t have a nest egg for retirement—for whatever reason—you have time to make an impact and improve your chances of success.

The tips below can help you start planning for retirement in your 50s.

On this page:

  • Use Your Catch-Ups
  • Review Social Security and Pension Benefits
  • Make a Plan for Debt
  • Understand Spending
  • Run a Quick Calculation (Right Here, Right Now)
  • Refine Your Investment Strategy
  • Start Thinking About Long-Term Care
  • Envision What You Want to Happen
  • Is it Too Late to Start Saving?

Use Your Catch-Ups

Once you reach age 50, you’re allowed to save extra in your retirement accounts each year. Those “catch up” contributions enable you to maximize your contributions (and pursue tax benefits) at a time when you hopefully have extra income.

The IRS sets maximum limits on how much you can contribute to retirement accounts. But at age 50 and beyond, you can contribute more, and it’s often a good idea to do so.

Here are some of the most popular account types with catch-up amounts for 2022:

  • 401(k), 403(b), and governmental 457(b) plans: $6,600 catch-up
  • IRA (Traditional or Roth): $1,000 catch-up
  • SIMPLE IRA: $3,000 catch-up

Remember that you can still contribute up to the maximum. These catch-ups are additional amounts that can go in on top of your standard contribution (assuming you have eligible income and meet other requirements). Also, 403(b) plans might have a separate catch-up for those with more than 15 years of service.

Of course, all of the above assumes that you have the cash flow to maximize your retirement contributions and catch-up contributions. But that’s not feasible for everybody, so do what you can to build up your savings.

Continue reading below, or watch this video with similar information:


Review Social Security and Pension Benefits

It might be many years before you claim Social Security retirement benefits. But it’s important to understand those benefits and take any action that can help you maximize your retirement income.

Set your expectation: Start by reviewing your Social Security statements to get an idea of how much you can expect from Social Security. With some realistic expectations (whether you assume you’ll get more or less than your statement shows), you’re better prepared to plan for retirement.

Check for errors: It’s crucial to verify that the Social Security Administration has accurate information about your earnings. If any income is missing, it could lead to a lower monthly income in retirement. These things are always easier to fix early—instead of at the last minute when you file for benefits.

Any opportunities? Your retirement income is based on the 35 years in which you had your highest earnings. If you don’t yet have 35 years of work history, you’ll have a zero in some of those slots. Consider if you’ll reach 35 years by the time you retire, and (to the degree you can control this), evaluate if earning more would impact your benefit.

Don’t ignore spouses: If you’re married or you were previously married (and now widowed or divorced, for example), examine how any spousal or survivor benefits might fit into your plan.

Pension income? If you’ll get a pension income from a defined benefit plan, repeat the steps above. Also, remember that pension income from a job can interfere with your Social Security benefits. That’s a factor when you worked for a government body that did not pay into Social Security, so be sure to account for any reductions.

Make a Plan for Debt

If you have any outstanding debt, it’s essential to have a plan.

Consumer Debts?

If you have consumer debts (such as credit cards), is there a way to eliminate that debt—and manage future spending—so that you can live off your retirement income and assets without borrowing? Once you’re on a fixed income, you’ll want to be sure your expenses stay below your income. This may require some budgeting exercises and difficult decisions, but it’s easier now than it will be later.

Mortgage Loans?

If you have mortgage debt, consider whether or not you’ll carry that loan into retirement. Some people love the idea of having the home paid off in retirement, and there is some value to being debt-free when you stop working. However, that’s not feasible for everybody, and a mortgage payment isn’t necessarily the end of the world. If you can fit that payment into your retirement plan, it might be fine to pay off your home during retirement. And that payment should eventually go away, which frees up cash flow for other needs.

Understand Your Spending

It’s always helpful to know where your money goes, and that’s especially true when you stop working. If you haven’t tracked your spending recently, it may be worth it now. You don’t necessarily need to track every penny—especially if you’re in good financial shape.

There are several ways to estimate how much income you’ll need in retirement, including:

  • Income replacement ratios
  • A detailed budget based on current spending
  • Lifestyle ranges

Your current spending is a reasonably good predictor of how much you’ll spend in retirement, although some things will change. You won’t have work-related expenses, nor will you pay payroll taxes. Plus, you’ll want to adjust today’s spending for inflation, which most calculators can do for you. That said, other approaches could be helpful.

Run a Quick Calculation

With a few key pieces of information, you can run numbers to get a rough estimate of how retirement might unfold. Doing so could alert you to significant shortfalls or give you confidence that you’re on the right track for retirement, even at age 50. Still, it’s wise to do a more detailed analysis before making big decisions.

Refine Your Investment Strategy

Your retirement plan should include a review of your investments. Around age 50, you might be within 10 to 15 years of retirement. While those are reasonable timeframes for investing, you’re less of a long-term investor than you used to be.

Retiring doesn’t mean you need to eliminate risk. But you need to be mindful of how much risk you’re taking. The “sequence of returns” studies tell us that significant losses in the years surrounding your retirement date can wreak havoc on your plan. So, you’ll want to ensure that you either have reserves for market downturns or you have other strategies in place for a badly-timed market crash.

If you’ve been speculating (day trading, for instance), take a hard look at your success and the long-term outlook for that strategy. If you can’t realistically expect to consistently get rewarded for taking substantial risks, it may be time to re-evaluate. High-risk strategies gained renewed traction during the market runup and pandemic experience, but those might not be the right fit for your life savings over the long run.

Start Thinking About Long-Term Care

By age 50, it’s time to incorporate LTC into your retirement planning. There’s no way to know whether or not you’ll need expensive care—or to what degree you’ll need care. But you can’t ignore this risk.

There’s a 70% chance that somebody turning 65 today will need some type of LTC services. That number comes from the ACL, a division of the U.S. Department of Health and Human Services. Those services include everything from unpaid care from a loved one (assuming somebody is willing and able—physically and financially—to provide that care) to skilled nursing facilities.

There are several ways to deal with the costs, and you should also consider the logistical and relational aspects of needing care. When it comes to costs, insurance was traditionally a solution, but those policies are far from perfect. In addition to researching LTC insurance, consider avenues like self-funding (possibly with home equity or investment assets) or spending down assets and going on Medicaid.

Envision What You Want to Happen

In addition to the financial aspects, it’s critical to plan for the softer side of retirement:

  • How do you want to spend your time?
  • What are you looking forward to?
  • How can you stay healthy and engaged?
  • Who might you spend time with?
  • What satisfies your desire for purpose or meaning?

You need a plan—besides “not working”—to make the most of retirement. Studies show mixed results, but some people suggest that your physical and mental health could change after retirement. Numerous factors are involved, but your relationships and engagement during retirement are likely important.

As just two examples at either end of the spectrum:

  • If you have a high-stress job that makes you miserable, retiring should improve your mental and physical health.
  • If you enjoy your work and it provides the majority of your social interaction and purpose, retiring (without a plan to stay engaged somehow) could cause a decline in your health.

If you retire to something instead of retiring from work, you might have a better chance of a more rewarding retirement.

Is it Too Late to Save for Retirement at 50?

No, although earlier is always better. In your 50s, you still have some runway, so it’s a great time to refine everything you’ve been doing so far. And if you’re just getting started, that’s okay. A traditional retirement age of 65 or so is still a ways off, and your full Social Security benefits begin at age 67 if you’re around 50 right now. It’s certainly possible to get everything in place over the next 15 to 20 years.

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