3 Questions About Retirement You Should Be Able to Answer by Age 50￼￼
As this current moment, retirement feels…a long way away. But that’s the problem: If you don’t spend some time vision boarding (then thinking practically and tactically) about it, it sneaks up on you and your lack of options may surprise you when the actual moment comes. Don’t panic. We caught up with Pam Krueger, the founder of Wealthramp and co-host of the PBS series Money Track, to get her advice on the questions you should know the answers to by 50—or at least before you get close to retiring.
1. Am I On Track with the Vision I Have for My Future Retired Self?
Sure, the future (meaning your retirement years) may feel foggy, but now is the time to have even a basic sense of what those distant goals—everything from the age you’d like to retire to where (and how) you’ll live—might look like. Here’s why: “When you’re in your late 30s and 40s, you’re in building mode, but you’re also really busy,” Krueger says. “It’s critical that you take this moment to sit down with a fee-only fiduciary planner—meaning their only goal is to be your advocate—who specializes in retirement planning.”
An example of something you should stress test: Your 401(k)—are you really paying attention to it? How does it line up with your future goals? For example, maybe you originally opted into a target-date fund (a portfolio of mutual funds and investments tailored to your retirement date). It is meant to automatically adjust your risk tolerance as you near retirement age, but maybe you want to tweak it. This is good to explore. Also, your investments. Is your money really going into investments that are going to build wealth for you? How much are you paying in fees for those investments? Are you asleep at the switch?
Bottom line: You need to gather that info—your future vision, your finances—together so you can accurately assess whether or not you’re on track.
2. Do I Have an Estate Plan?
Maybe you have a spouse and kids, maybe not. Even if you’re just assessing how you’ll care for your aging parents and even if you feel like you have very little tangible assets, you need an estate plan. “It’s actually a misnomer to call it that—think of an estate plan as a life plan for the people you love,” Krueger says. “Your parents who are going to pass before you; your spouse who might pass before you; your kids and extended family. If you care about them, you want to make sure you have answers to all the ‘what if’ scenarios running wild in your head.”
And it’s not just life and death: An estate plan covers hospitalizations and health care, what might happen if a loved one should end up disabled and more. “It’s family stuff that you have to get in place in your 30s and 40s because, if you set it up today, you won’t stress out about it tomorrow,” Krueger says. “That’s the main point of retirement planning: To reduce stress and anxiety around money.”
3. How Much a Year Do I See Myself Needing to Spend?
People wax on about having a ‘magic number’ (in other words, the amount of money you need to retire) but Krueger says what you really need to zero in on is: What retirement lifestyle is realistically attainable and is it going to make me happy? “It’s basic, but it’s so important because if you feel anxious that you don’t have enough in savings and you’re in your 50s, you’ve got to ask yourself: ‘Am I willing to consider working longer into the future? Downsize my house? What do I need to do today to change that number or that lifestyle?’ If the reality is that you’re going to have a nest egg of $1 million and you wanted $3 million, what are you willing to do to triple that before you retire? Or what are you willing to let go of to live happily with $1 million?” Krueger says. The sooner you do these calculations, the bigger the impact you can make on how much you save.
Think of it this way: You’ll have your social security, and you’ll have your savings and whatever income you collect leading up to retirement, but this is about not making any assumptions and truly evaluating what your finances will look like when you retire. Ultimately, you want to know that you’ve got enough money set aside in cash so that you can feel comfortable when you retire. “Maybe in your late 50s, you work to build up one to two year’s worth of living expenses in your checking or savings account so you can go to sleep at night knowing the market can do its thing and you won’t have to sell stocks at a loss.”