Retirement Planning for your 50s

In our last article, we talked about how many people in their 40s face a continuation of the same financial and retirement planning challenges that they did in their 30s. While they may be nearing the height of their earning capacity, they also may be facing significant financial obligations that make saving for retirement especially challenging.

The 50s: Approaching the Finish Line

After perhaps a lifetime of diligently saving money on a consistent basis, individuals in their 50s are starting to get closer to the day when they hope to actually enter into and enjoy the retirement they’ve been planning for so long. If you think of it like a marathon race, the 50s represent the stretch right before the final mile or so, when runners want to prepare themselves for a strong final push that will carry them successfully to the finish line.

Given this, the 50s often represent a subtle but significant shift in retirement planning strategies on two fronts. First, with actual retirement perhaps looming just beyond the horizon, this life stage may present an opportunity for a last push to save as much money as possible before retiring. And second, it may also be appropriate at this time to shift the asset allocation mix in order to help preserve the assets that have accumulated in a retirement plan.

Unlike people in their 20s or 30s, individuals in their 50s have a much smaller window of time left in which to save and invest for retirement. In other words, time definitely is not on their side, which should make saving as much money as possible a primary goal during this life stage.

The good news is that for many individuals, the 50s represent the peak earning years of their life. They also represent a time when their expenses may be lower, as their children may have moved out of the house and completed their college educations. These factors make it easier for some individuals and couples in their 50s to contribute more to their retirement plans than at any other stage of their life.

The Asset Allocation Mix

Meanwhile, individuals in their 50s should also be keeping a close eye on their asset allocation mix. Not only do they have less time to save for retirement, but they also have less time to make up for potential losses in their retirement portfolio.

Therefore, it may be wise to begin to gradually shift this mix so that there is less exposure to investments that may be more volatile in the short term (like equities) and more exposure to those that generally have less volatility, such as fixed-income investments (like bonds) and cash equivalents.

Doing so, though, could lower overall return in the portfolio, as fixed-income instruments and cash equivalents generally offer lower return potential than equities. So individuals in their 50s who have not been able to save as much as they would have liked may have to accept a higher degree of risk and volatility in order to achieve the returns necessary to meet their retirement saving goals.

In the next article, we will take a detailed look at retirement planning strategies for individuals in their 60s.


By Martin Walcoe, SVP, David Lerner Associates

Material is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. (DLA). This material does not constitute an offer or recommendation to buy or sell securities and should not be considering in connection with the purchase or sale of securities

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