In Your 50s? Do These 3 Things to Plan for Your Retirement

Your 50s are a time of transition. Many workers reach their peak earning years in their 50s, having found their ideal career niche. If you have a family, your 50s are also the time when children have either left or are leaving the nest. That adds up to a lot more disposable income, and if you're like many people and have procrastinated saving for retirement, it's a smart time to catch up.

Yet at the same time, many workers start to get the itch to look more closely at early retirement when they hit their 50s. Whether it's the daily grind or the fear of failing to achieve all of their bucket list dreams, the prospect of punching a time clock until 65 or later might sound close to unbearable.

No matter which way you find yourself leaning, it's smart to do some planning in your 50s to prepare for your eventual retirement. Here are three things in particular that you should be sure to do.

1. Use your catch-ups

The federal government knows all too well that many people don't have the means or motivation to start worrying about retirement until later in their careers. That's a big reason why there are several provisions in the tax laws that allow late-starters to catch up on their retirement. These include:

• Additional $1,000 annual contributions to IRAs once you reach age 50.
• Additional $6,000 annual contributions to 401(k)s and similar employer-sponsored plans upon hitting 50.
• Additional $1,000 annual contributions to health savings accounts once you pass your 55th birthday.

If you're fortunate enough to have more money to save in your 50s, taking advantage of these provisions can jump-start your retirement savings and get you in a better position to retire exactly when you want.

2. Prepare for Social Security

For most workers, Social Security is a key source of income in retirement. So whether you expect to work a while longer or try to retire early, knowing how Social Security will affect you is important.

If you're planning to retire early, you need to understand that Social Security won't be there for you for quite a while. Early benefits for workers become available only at age 62, and to obtain full retirement age benefits, you'll have to wait between four and five years longer. As you'll see in more detail below, that makes it essential for you to find alternative sources of income during your 50s and early 60s.

Meanwhile, if you're planning to keep working indefinitely, maximizing your earnings is the best way to give your Social Security benefits a boost. To calculate your monthly payment, the Social Security Administration looks at the 35 top-earning years of your career, calculating average monthly earnings after indexing your earnings history to account for inflation. The more you earn now, the more you'll boost that average, and that can make a huge difference to what you get from Social Security in your golden years.

3. Get access to your savings in early retirement

If you decide to retire early in your 50s, it's helpful to know when you can tap into your retirement savings. If you've used regular taxable accounts to invest your savings, then you'll have access at any time regardless of age. But if you have a lot of money locked up in 401(k)s, IRAs, and other tax-favored retirement accounts, then you need to know the rules a little better.

For traditional IRAs, the general rule is that withdrawals before reaching age 59 1/2 are subject to a 10% penalty. There are exceptions to the rule for a number of items, including money taken out for expenses related to higher education, large medical bills, or up to $10,000 toward the first-time purchase of a home. But unless you want to go the relatively complicated route of setting up a series of substantially equal periodic payments, holding off if possible can be the best option.

For 401(k) plans, the rules are slightly different. If you leave your job at age 55 or later, then you can start taking penalty-free withdrawals immediately. However, this rule only applies to the 401(k) you had at the employer where you worked when you turned 55 and subsequently left. If you quit before turning 55, then the special rule doesn't apply, and you'll have to wait until age 59 1/2 as you would with an IRA or other retirement account.

You can retire

It might be hard to imagine that retirement is just around the corner in your 50s. But by keeping these ideas in mind, you'll put yourself in the best possible position to retire with the financial security you want.

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