Your 50’s is a time when you see the fruits of your labor come to fruition. This is typically the period where you will earn the highest income. On the home front, your family will experience changes as your children leave for college, graduate, and perhaps start families of their own. From a financial standpoint, your 50’s is about defining what retirement means to you and finding the right balance between living for today while planning for tomorrow.

Once you reach 50 your contribution limits increase across your retirement accounts. For the year 2015, 401k and IRA contribution limits are $24,000 ($18,000 + $6,000 catchup) and $6,500 ($5,500 +$1,000), respectively. At this stage in life it is important to increase your retirement savings with catchup contributions as retirement is now in front of you with fewer years to prepare.

Hopefully you started saving for emergencies in your 30’s and have built a liquid cash reserve to withstand many unforeseen emergencies. At 50, you can now transition from saving for emergencies to paying off debt and accelerating your mortgage payments. One goal may be to eliminate all of your revolving debt so when you reach your 60’s you can solely focus on paying off your home.

When you reach 50, it is important to create a long-term retirement plan to help you navigate the current decade and prepare for the transition that may come in your 60’s. Your long-term retirement plan should outline the various sources of incomes you will receive once you have stopped working. Your retirement plan should address your future expenses and how you plan to minimize them, such as downsizing your home or moving to a more tax-friendly state. Finally, make sure your comprehensive retirement plan covers multiple life expectancy scenarios.

It is also important to address potential long-term healthcare costs, whether they may be general healthcare or something potentially more costly, such as permanent disability or assisted living with an in-home aide. It is important that you consider purchasing long-term care and/or disability insurance to help with unforeseen expenses. As much as you would like to live in your home throughout retirement, you have to prepare for any health erosion that could be beyond your control.

Finally, if you have not done so already, you should create a documented estate plan outlining your wishes. It might be uncomfortable to think about your own mortality, or to make arrangements around your passing, but it is important to document how you want your assets and wealth transferred to your heirs, charity, or a special cause in an unfortunate event. By having your wishes recorded, your estate can avoid the time and costs associated with probate, and it may be possible to avoid unnecessary taxation and fees. If your children are minors, your estate plan should indicate who would take guardianship of them rather than letting the court decide. As uncomfortable as it may be, it is very important to create an estate plan.

In summary, your five money goals in your 50’s should be:

  1. Increase retirement savings with catch-up contributions.
  2. Pay off debt and accelerate your mortgage payments.
  3. Create your long-term retirement plan.
  4. Consider loss mitigation by purchasing disability and long-term care insurance.
  5. Create a documented estate plan outlining your wishes.

Originally published on Paladin Registry by Paragon Financial Partners:

Author: Paragon Financial Partners

Paragon Financial Partners, Inc. is a Registered SEC Investment Advisor. The topics discussed herein are for informational purposes only and should not be considered as a solicitation or offer to purchase or sell any securities. The financial strategies and guidelines discussed herein may not be appropriate for everyone as each individual circumstance is unique. Please review all tax information with your tax professional. Please review all legal information with your legal professional. If you have any questions or would like to speak with us, please contact us by phone at (310) 557-1515 or by email at info@paragonfinancialpartners.com.