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Turning 50? Time for a retirement tuneup

With retirement now in sight, it's time to revisit those plans you devised two decades earlier to see if they still fit the reality. Here are 7 steps to take to tune up your retirement plans.

By MSN Money Partner Jun 11, 2013 5:31PM

This post comes from Elizabeth O'Brien at partner site MarketWatch.

MSN Money PartnerFifty may be the new 30 when it comes to how you feel -- and if you’re Madonna, how you look -- at midlife. But those ages are worlds apart when it comes to planning for retirement. By 50, the end of full-time work has come into view, however distant, on the horizon.

Image: Man working on car © Jose Luis Pelaez Inc/Blend Images/Getty ImagesThis makes the half-century mark a great time to take stock -- and, if you haven’t done it already, to evaluate whether you’re on track to enjoy financial and physical well-being when you retire. At 50, experts say, there’s still time to play catch up and make adjustments if needed to protect your health and wealth for the next phase. “If you start at 50, it’s possible everyone can get what they want, but if you start at 64, there’s less flexibility,” said Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial.

A good place to begin, de Baca said, is by imagining your perfect retirement. It helps to get some sense of the big-picture goal before assessing what obstacles might lay in its path. And life partners should compare notes. It’s better to discover sooner rather than later that one person’s idea of retirement bliss is a house overlooking the seventh tee, while the other dreams of an apartment in the city.

To be sure, folks at 50 have many other demands on their time and money: college tuition or wedding payments for their kids, support for aging parents, and serious work obligations. Yet you should fight the impulse, however understandable, to put retirement on the back burner. “It might not be opportune,” said Rand Spero, a fee-only financial planner in Lexington, Mass. “But it actually is the most critical time.”

Here’s a checklist to help 50-year-olds stay on track for a retirement that’s healthy in every sense of the word:

1. Get your paperwork in order

If you don’t have a health care or financial power of attorney, now is the time to put them in place. The former names a person, known as an “agent,” to make health-care decisions on your behalf if you become too sick or mentally impaired to do so.

Similarly, the latter names an agent to handle your financial affairs if you’re no longer able to do so. It’s important to establish these before a crisis strikes. Review beneficiary designations on your life insurance policies and investment accounts, and make sure your will is up to date.

2. Get screened

An investment in good health will pay dividends throughout your life. Experts estimate that one-third to one-half of a person’s longevity can be attributed to genetics, but healthy eating and exercise really can improve your quality of life in the remainder that you can control. Talk to your doctor about which medical screenings make sense for you. And it’s never too late to start exercising and eating more healthily. Studies suggest that you can reap benefits from even moderate exercise, such as vigorous walking.

3. Protect yourself

Slightly more than 25% of today’s 20-year-olds will incur a long-term disability -- one that renders them unable to work for a year or more -- before reaching age 67, according to the Social Security Administration. But 69% of the private-sector workforce has no long-term disability insurance. What’s more, the group long-term disability plans that people get through their jobs typically cover just 60% of their salaries in the event of a disability. At that level, most disabled people won’t be able to meet day-to-day expenses, much less contribute to their retirement savings accounts, de Baca said.

To make up for the shortfall, or to obtain coverage in the first place if work offers none, many people would benefit from buying an individual disability policy, she said.

Fifty is also a good age to start thinking about how you might pay for long-term care, which Medicare doesn’t cover. Long-term care insurance has become expensive and harder to obtain, but it’s still worth a look for healthy people in their 50s, some advisers say. Others advocate life insurance policies with a long-term care rider. Those without children in particular might also think about developing their social support networks, experts say; such networks can often help older people stay at home for longer, among other benefits. 

4. Create a retirement budget

Without a budget you have no way of knowing whether your savings will come up short after stopping work. Instead of starting with an arbitrary dollar goal, like $1 million, figure out how much you’ll need to live each month and project out from there, experts advise. A financial planner can help by stress-testing your projected nest egg under different market conditions and life spans. Make a plan to eliminate credit card debt and consider paying off your mortgage before you stop work.

Be sure to build in a cushion for unexpected expenses: a recent Ameriprise Financial survey found unforeseen losses and expenses such as a market decline or the need to support a grown child cost Americans an average of $117,000 in retirement savings.

5. Reassess your portfolio

Check to see that your current asset allocation is appropriate for your goals. The old rule of subtracting your age from 100 to calculate your portfolio’s stock allocation is a thing of the past, advisers say. Unfortunately, there’s no easy formula that has replaced it. It’s important not to be too conservative in your 50s, since you’ll need portfolio growth to fund a retirement that could stretch for three decades. Today, many investing pros are expressing concern about bonds, whose yields have been rising and prices falling.

If you’re invested in target-date funds, all-in-one mutual funds that rebalance your portfolio as you get closer to retirement, Bob Pozen, a senior lecturer at Harvard Business School and a senior fellow at the Brookings Institution, recommends taking another look at them to make sure you’re comfortable with the asset mix. 

6. Reassess your career

Can you envision staying at your current job for the next 15-plus years? If not, it might be time to make a change. Spero recently coached a client in his early 50s through a career shift. The man had worked as a senior sales manager, a high-powered, high-stress job. While he was successful, the client didn’t see himself sustaining that pace into his late 60s. Yet he couldn’t afford to retire early. So he shifted over to a curriculum development job, where he writes sales training materials and conducts trainings. His total compensation isn’t quite as high as before, but it’s more stable because it isn’t commission-based, Spero said, and the man can envision working at his new, less frenetic pace until retirement.

7. Play catch-up

The IRS allows people 50 and over to make “catch-up contributions” to their tax-advantaged savings accounts. Those maximum amounts for 2013 are $5,500 for 401k's (on top of the maximum of $17,500 for those under 50) and $1,000 for IRAs above the under-50 limit of $5,500.


More from MarketWatch:

Jun 12, 2013 6:33AM
Reassess if anything on MSN Money has any value.
Jun 12, 2013 11:02AM
The budget advice is gold: for two years, several years before I retired, I kept a detail record of my spending, dividing up variable spending into "necessities" and "luxuries," for example: food was divided into groceries, snacks, beverages, and restaurants.  When I retired I had an excellent idea of how much I needed to maintain my lifestyle.

I would also advise paying off the mortgage ASAP if you have one.

Jun 12, 2013 8:02PM
50 is a little late to start worrying about your retirement. The key to saving for retirement is to start early and be consistent. Save with every paycheck and take advantage of any employer matching plan. Unfortunately most in their 20s and even 30s and 40s don't think about retirement. The site retirementandgoodlivng offers some good information about finance, health, retirement locations, etc. Worth checking out.

Jun 12, 2013 7:43PM
This article raises some great points about the need for a Long Term
Disability plan.  However, one thing that this article doesn't discuss is
that LTD policies that people obtain through their employer or union, are
regulated by the Employee Retirement Income Security Act (ERISA) which can
drastically reduce one's ability to enforce the terms of your insurance
policy if your insurer denies your claim.  When considering an LTD policy,
the private plans may be a little more expensive but grant a wider array
of tools to help ensure that you get your benefits.

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