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Retirement Planning in Your 50s – Preparing for Life in Retirement

by Kevin Mercadante

In a very real way, the heat is on when you are in your 50s and planning for retirement. In this decade of your life you are no longer talking about preparing for an event in the distant future. Retirement is right around the corner, and you should mostly be putting the finishing touches on your plans.

Your Retirement Portfolio and Goals Should be Coming Together

Retirement Planning in Your 50s

You are entering the home stretch

Hopefully you have been saving for retirement for the past 20 to 30 years, and that should give you a nice nest egg. From here on, you’re mostly building on a solid base and putting the final touches on your portfolio before retirement. Your retirement portfolio should be rapidly building up toward the goals that you have set for yourself.

One of the advantages you have your 50s is that you are no longer relying on very long-term projections to determine if you have enough for retirement. With retirement just a few years away, your portfolio should start looking like the finished product that will carry you into and through retirement.

You should continue tracking your progress however – these investing tools may be helpful. If there are any holes in your retirement portfolio, now will be the time the fill them. The 10 to 15 years that you have left should give you plenty of time to do that.

Your Overall Financial Situation Should Start to Calm Down

Another advantage to retirement planning in your 50s is that your financial situation should start calming down and becoming more predictable. If you have children, chances are good they’re grown and starting to become self-sufficient. If they’re finished with college, your financial burdens suddenly become a lot lighter.

This may also be the time to downsize your living arrangement, if you haven’t already done so. While you may need a four bedroom, three bath, two car garage home to raise your family in, it’s now just you and your spouse, or you alone, and you’re free to live wherever want. You can trade down to a two bedroom, two bathroom condominium for half the price of your home. Not only will it cut your house payment, but it can also free up a lot of capital for retirement purposes.

With your living expenses declining, this will also be the time to pay off any lingering debt. You’ll obviously want to eliminate any credit card debt you have, and plan to purchase any future vehicles with cash. The less debt that you are carrying into retirement, the less income you will need. In between now and the time you retire, this will also free up more income for investment purposes.

At this time in your life you may want to consider making investments outside of your retirement plans. Not only will this provide capital for retirement, but it might also make you less dependent on your retirement savings themselves. People are now living for 30 or more years into retirement, and preserving retirement assets is a new priority.

This is the Decade to Ready Your Life for Retirement

We already discussed the importance of getting out – and staying out – of debt at this point in your life. We’ve also considered trading down on your home to lower your cost of living. But now is when you may also want to think about where you want to live. That question goes beyond the idea of a house or condo, and gets into how you want to live.

For example, this may a be the time to consider the possibility of living in some sort of a retirement community for seniors. You can also decide whether you want to live in a resort community or resort area. That can mean living at the beach, living in the mountains or near a major golf course.

There are often preparations required well in advance of making a major geographic move. Now is the time to do some investigating and research, and make any financial preparations you need to in advance.

Beyond your living arrangement, you may also want to consider whether or not you want to work in retirement. Many people do so as a way to supplement their retirement income, but also to stay active and involved. Alternatively, you may decide that you want to do charitable work. If you do, now would be the time to investigate the possibilities on which direction you want to go in.

Asset Allocation in Your 50s

vanguard 2025 target retirement funds

Sample Asset Allocation (Vanguard)

As you move into and through your 50s, your asset allocation will become progressively more conservative. This is something you’ll want pay close attention to as each year passes. It’s important to keep in mind that as your time-frame before retirement shrinks, you’ll be less able to recover from a major stock market shock.

As you move through your 50s you begin gradually lowering your stock allocation and increasing your positions in fixed income investments. This can be done for you automatically by using target date funds, but if you choose not to go that route, you can use the funds as a model for your portfolio based on your age.

Based on a target date fund allocation, if you‘re in your early 50s, your portfolio should be invested in a mix of 71% stocks and 29% bonds (based on Vanguard’s model, seen in these images). This is an important shift, because with only a decade or so to go until you retire, you’re going to have to invest in such a way that you a) minimize your losses, and b) position yourself to recover any losses in the shortest amount time possible.

Vanguard asset allocation 50s

Asset Allocation example for your 50s, from Vanguard

This also means that you will be in less of a position to increase your portfolio by adding a higher percentage of high risk investments to improve your returns. Not only will you be lowering your stock allocations, but you’ll have to begin avoiding the highest risk stocks in favor of sectors that are more conservative in general.

How to manage your asset allocation across multiple accounts: It’s important to look at your entire investment portfolio as one large bucket when you balance your investments. An easy way to help perform a asset allocation across your entire investment portfolio is with a free tool called Personal Capital. This powerful tool can help you see how your investments work together. You can learn more in our Personal Capital Review, or sign up for a free account at their site.

If you’re in your 50s, how has your retirement planning changed from earlier in your life?

More in this series:

Photo credit: 50 – Leo Reynolds, Asset Allocation – Vanguard


Published or updated May 23, 2013.
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