The approach of a milestone birthday is a reminder that, as life changes, so do your needs and circumstances.
With the Big Five-O, the question is settled: You’re no longer a kid. And that’s a great thing; maturity is much better than it’s cracked up to be.
So, instead of dreading it, update your financial life by hitting the following targets and embrace the coming decades.
1. Debt: Tamed
Maybe it’s maturity, or maybe it’s the prospect of dragging debts through your so-called golden years, but you have paid off your debts or have them under control.
You add new debt only when you can easily handle it. You pay credit card balances before interest is applied.
2. Spending: Under control
With children possibly gone from the home and maybe even out of school, you may have more money on hand now. It’s tempting to spend it. After all, your friends may be living it up, and you’ve worked hard to get here.
Have fun, but don’t shortchange your retirement goals. If you are well-employed, your 50s are a gift — probably the best earning years of your life. Double down on savings, as retirement may last a long, long time.
Also, start thinking about how you’ll change your spending after retirement.
3. Retirement goals: Defined
Set a concrete goal for your retirement savings. Just do it. The kids will find a way to pay for college if it matters to them. They have years to get on their feet financially. You do not. Set a retirement income goal now so that, if you are short financially, there’s time to improve things.
There are a couple of approaches. One is to set your goal for the amount of money that many investment professionals suggest you should save by retirement: 10 to 12 times the amount of your last full year of income.
Say, for example, that you expect to make $80,000 the last year that you work. Under this guideline, you would need to set aside $800,000 to $960,000 for retirement.
Another approach is to see how far your current retirement savings will take you. Online calculators can help you compute this — just don’t bank on a calculator’s answer.