http://finance.yahoo.com/news/how-to-retire-rich--6-smart-steps-at-ages-50-66.html
How to Retire Rich: 6 Smart Steps at Ages 50-66
Focus on the finish line. It's time to get serious about saving
At [age 50 to 66], retirement isn't a far-off goal you'll worry about
someday when you're ready for your second hip replacement. Unless you
plan to work until you drop, retirement is staring you in the face.
That
means it's time to get deadly serious about saving, especially if you
haven't saved enough.
And that's true for most people: Nearly a third of
Americans age 55 and older have saved less than $10,000 for retirement,
according to the Employee Benefit Research Institute. Only 22% have
saved $250,000 or more.
"With our
clients, the last ten years that they work is when they save the most
money," says Mark Bass, a certified financial planner in Lubbock, Tex.
To make sure you're on track, don't hesitate to seek help from a
financial planner or use the many resources available on the Internet.
[More from Kiplinger: State-by-State Guide to Retiree Taxes]
Once you're 50 or over, you can contribute thousands more to your
401(k) plan. For 2012, you can contribute
an additional $5,500 over the annual limit of $17,000, for a total of
$22,500. Any employer contribution on top of that is gravy.
Don't
stop there. You can also make a $1,000 catch-up contribution to an [Roth] IRA,
for a total contribution of $6,000 in 2012. Unlike with a traditional
IRA, you don't have to take annual minimum withdrawals from a Roth once
you turn 70 1/2.
There are, however, income limits on Roth
contributions. You're eligible if your modified adjusted gross income is
less than $125,000 ($183,000 if you're married and file jointly).
Dare to downsize. Even if your home hasn't
returned to its former value, moving to a smaller home could save you
thousands of dollars a year in taxes, utility costs and insurance.
That's money you can funnel into retirement savings.
Consolidate your orphaned 401(k) plans.
You've probably changed jobs several times, and you may still have
money in former employers' 401(k) plans. Leaving money in a former
employer's 401(k) plan isn't as bad as cashing it out. But as you
approach retirement, it's a good idea to consolidate your savings in one
IRA with a low-cost financial institution. You'll get a better handle
on how much money you have and where it's invested. You'll also have
more fund choices, and you may pay lower investment fees, Nicolini says.
Consider long-term-care insurance. A
well-funded retirement savings plan could be decimated in a matter of
months if you end up in a nursing home or require round-the-clock home
health care. Medicare doesn't cover the cost of long-term care, and
Medicaid isn't available until you've spent down most of your savings.
Bass
says he typically starts talking to his clients about long-term-care
insurance when they're in their early sixties. Instead of a policy that
provides lifetime coverage from the day you enter a nursing home, he
says, consider a policy that will cover a specific period, such as up to
five years. (The average stay in a nursing home is two and a half
years.) Adding a waiting period -- for example, 90 to 120 days -- will
also lower your premiums. Look for a policy with an inflation rider so
your coverage will keep pace with rising medical costs.
Weigh your Social Security options.
You're eligible to file for Social Security benefits when you turn 62,
but if you do, your monthly check will be reduced for the rest of your
life. You may have little choice if you are out of work or in poor
health and need the money to pay expenses. But if you have the
wherewithal to work a few more years or have other sources of income,
delaying checks until at least age 66 will increase your monthly
benefits by 33% or more.
That's not the only way working longer
could boost your payouts. Your benefits are based on your highest 35
years of earnings. If you're a highly paid employee, working longer
could displace some of your lower-earning years.
Earlier this
year, the Social Security Administration introduced an online tool that
allows you to review your earnings record and get an estimate of your
benefits. You should review this record annually, because unreported or
underreported earnings could reduce your monthly payments. To get your
online statement, go to www.ssa.gov/mystatement.
Reassess what you'll spend in retirement.
If you refinanced to take cash out
of your home, you may still have mortgage payments. And even after
you're eligible for Medicare, you'll spend a lot of money on health care
costs. Fidelity Investments estimates that the average 65-year-old
couple will spend $240,000 on health care in retirement.
Still
convinced you can live on less? Try living on your projected retirement
income while you're still working. This exercise will force you to cut
back on spending, which means you'll be able to save more. And at this
point in your life, saving is one of the few things you can control. "As
we often tell our clients," says Bass, "a good saver will beat a good
investor every time."
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