NEW BERLIN, Ill. ( TheStreet) -- As you navigate the ages from 40 to 50, you're in a unique position. You have been working for 20-plus years and are probably at a point where you're earning more than ever before. This is a critical time as you prepare for retirement -- by the time you reach your 50s, retirement is no longer a far-off dream. It's only 10 to 15 years off.
A few financial factors common for 40-somethings to be facing include:
|This is a critical time as you prepare for retirement, which means it's time to ask some tough questions.|
- You have a dream of retiring by around age 60. This may not be a formal goal, but it's what you're dreaming of.
- You have begun participating in a retirement plan through your employer, but you only started recently and are not maximizing your contributions.
- You have children either in college or soon to be attending college.
- You have a mortgage extending out at least 20 years.
With the above factors in mind, now is the time to develop a retirement strategy and, most importantly get going on it.Plan realistically for your retirement
You may have a dream of a particular date or age in mind, but have you really started planning for it? A few questions you need to clarify for yourself are:
- What year is your retirement goal? Your spouse's?
- How old will your kids be at this point?
- Where will your mortgage be at this stage? What about your retirement savings balance?
- What does "retirement" mean? Is it stopping all wage-earning work, or perhaps slowing down to a part-time or less-demanding job?
- What will your fixed expenses be -- projected with an inflation factor?
- What is your health history (and your family's health history)? Do you have relatives who have lived to advanced age, say into their 90s and even 100s?
If you're eligible for an employer-sponsored plan such as a 401(k), you should be maximizing the amount you set aside each year ($16,500 for this year). You should also contribute the maximum amount to a Roth IRA as long as your income allows it. The maximum amount for this year is $5,000. Let the kids help pay for college
We all would love to be in the position of providing an education to our children. The problem is that by focusing on paying for college, we often short-change our retirement plan contributions. There's no law against your child's participating in paying for college -- in fact, there is an argument to be made that the child might be a bit more serious about their education if they have some "skin in the game" by working to pay for college or taking responsibility for the loans. There are many programs to loan money to pay for college; there are none to help pay for retirement. Manage your mortgage
The move you want to make here is to manage the mortgage so you have this debt paid off by or before your planned retirement age. This may include a downsizing of the home, accelerating payoff by making additional payments or possibly refinancing to a lower rate. Eliminating the mortgage helps you in two ways: you have more income available for savings, and when you enter retirement you'll have fewer fixed expenses. >To submit a news tip, email: firstname.lastname@example.org.