If you're planning to retire by 50, congratulations are in order. However, before you reach that celebratory milestone, you have a lot to consider about your financial situation and your lifestyle.
Because 50 is considered early retirement, you won't be able to avail yourself of many of the benefits typically available to older retirees for almost a decade or more.
"Not only your number as in your goal amount you want to have when you retire, but your goal retirement age, your monthly spending habits, your debt, etc.," said Andrew Rosen, FFP and president of Diversified LLC.
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2. Invest as Early as You Can
Rosen recommends investing as early as you can so compounding interest can work in your favor.
Rosen pointed out that automating your investments will help you stay on track and reach your goals. He also recommends setting up automatic increases to your 401(k) or setting a reminder to do it yearly.
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4. Take Advantage of Employer Matching
Rosen also recommends making sure you're contributing enough to your 401(k) each year to get any matching funds your employer might offer.
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5. Keep Tabs on Your Contributions
Rachel Burk, financial advisor and financial planning specialist with Offit Advisors, said, "Double and triple check your contributions to make sure you are saving what you can."
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6. Download Your Social Security Statement
"Social Security calculates your 35 highest earning years to determine your final payment, and most people's highest earning years are right before their retirement," said Burk. "Looking at your statement will show you your fixed income portion of your retirement."
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7. Get Out of Debt and Stay Out
"Debt is stealing from your future, and retiring without debt will make your expenses manageable," said Jay Zigmont, Ph.D., CFP and founder of Childfree Wealth.
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8. Determine if You Really Want To Retire
"There are other options, including shifting to passion work, starting a small business or other ways of following your dreams," said Zigmont.
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9. Have a Tax Plan
"If you retire at 50, you will be better off if you have a mix of taxable and tax-advantaged accounts to avoid penalties for taking out money before 59 ½," Zigmont said.
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10. Have a Plan for Long-Term Care
"Long-term care may be one of the largest single costs in your retirement, so you need a plan, either money set aside or a long-term care insurance policy in place," said Zigmont.
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11. Get on a Budget
"In retirement, you will have a fixed income, so having a budget now will build behaviors that will help you in retirement," said Zigmont.
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12. Have a Comprehensive Financial Plan
"Work with a certified financial planner to create a financial plan that will support you through your retirement," Zigmont said.
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13. Track Your Expenses and Your Net Worth
Maggie Tucker, an early retiree at 41 and Friends on FIRE podcast co-host, said that this is one of the best things you can do each month to improve your finances.
"Having a fully transparent view of your expenses and overall net worth gives you something to measure against to improve habits and make improvements," Tucker said. "We frequently say, what gets measured gets better, and we truly believe it!"
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14. Focus on What's Important in Life
"Too many people realize these things later in life and have lost decades of better financial practices," said Tucker. "Don't try to keep up with the Joneses, because the Joneses are in debt and miserable. The Joneses aren't going to be retiring at 50, but you can!"
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15. Avoid Lifestyle Inflation
"Realize that no one cares about your stuff and don't buy things to impress other people," Tucker said. "Don't allow your lifestyle to get inflated as you start making more money; instead, save and invest that money towards your retirement goal."
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16. Educate Yourself
"Read popular personal finance books and listen to podcasts so you can learn and educate yourself on how to manage your money," said Tucker. "This inspiration will pay dividends in your goal to retire by 50."
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17. Don't Overspend on a Car
"Buy a reasonable car, aligned to how much money you have/make," Tucker said. "Don't buy a fancy car. No one cares about your car."
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18. Think Differently About Your Home and Real Estate
"Buy a cheaper house than the bank might approve you for," said Tucker. "Get a 15-year mortgage, or if you can't afford that, reconsider your home choice. Run the math on renting versus a mortgage; it might actually be OK to rent. Also, consider what is called house hacking."
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19. Take Advantage of Optional Employer Benefits
"This could be anything from your 401(k) to HSAs (Health Savings Accounts), to FSAs (Flexible Spending Accounts), to discounts on large purchases like mattresses or insurance," Tucker said.
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20. Don't Let Investing Intimidate You
"Use something like Wealthfront if you're intimidated by how to get started, or go open an account with Vanguard or Fidelity and buy basic index funds like VTI or FZROX," said Tucker.
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21. Have Healthy Financial Discussions With Your Partner
"You two can help to hold each other accountable and continue momentum on your financial goals," said Tucker.
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22. Review Your Life Insurance
"Make sure you have enough coverage to meet your family's needs in the event of your death," said Michael Ryan, financial coach and owner of MichaelRyanMoney.com
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23. Review Your Health Insurance
"Make sure you have enough coverage to cover your medical needs, including any prescription medications you take," said Ryan.
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24. Review Other Insurance Coverage
"Make sure you have adequate coverage for your home, car and other assets," said Ryan.
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25. Review Your Financial Goals
"Make sure your financial goals are realistic and achievable," Ryan said.
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26. Work Backward
"Think about where you want to be at 50, then reverse engineer your goals, so you are working toward that every year," said Sarah Becker, a financial educator and consultant and owner of Becker Talks Money.
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27. Think About the Inevitable
"Create a will and/or legacy plan for how you want your remaining assets allotted after death," said Becker.
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28. Focus on the Future
"Always be thinking about what you can do today that will help future you," Becker said.
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29. Add Passive Income Streams When You Can
"I try to add one income stream every two years (mostly passive)," said Becker.
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30. Be Mindful of Your Motivation for Spending
"Do not spend money on things that do not align with your values just because your friends are," said Becker. "If you don't get clear on your own goals, you will fall prey to someone else's."
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31. Stay Healthy
"Consider exercising, eating healthy, and seeing your doctor regularly," said Kelan Kline of The Savvy Couple. "It will help you reduce your health costs and enjoy a longer retirement."
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32. Pay Off Your Student Debt
"These loans tend to be lower-interest than most other forms of debt, but they can really linger in part due to the low, income-based payments you're allowed to make on them," said Melanie Hanson, editor in chief with EDI Refinance.
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33. Pay Off Your Mortgage
"If you have a mortgage, consider paying it off before you retire," said Katie Kavehrad, a financial planner with Paradigm Wealth Partners.
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34. Budget for Other Housing Costs
"When considering housing costs in retirement, even if you have paid off your mortgage, don't forget about property taxes and maintenance costs," said Kavehrad.
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35. Pay Off Your HELOC
"If you have a HELOC, pay it off before retiring," recommended Kavehrad.
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36. Pay Off Any Loans on Employer Retirement Plans
Kavehrad also said, "to pay off any loans you've taken out through employer retirement plans, such as your 401(k)."
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37. Consider Pension Payout Options
"If you will receive a pension, consider your payout options ahead of time," said Kavehrad.
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38. Consider Depreciation
When making large purchases, really consider if the money you'll end up spending is really worth it due to depreciation. For example, Becker said, "never to buy a new car."
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39. Consider Cutting Back on Expenses Ahead of Time
"Consider cutting back on costly hobbies like dining out frequently and taking expensive holidays," said Levon Galstyan, a certified public accountant at Oak View Law Group. "Otherwise, you might run out of money."
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40. Consider Downsizing Your Home
"Consider downsizing your home if your children have moved out and are of adult age," said Galstyan. He also suggested taking the money you save and paying off debt.
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41. Don't Jeopardize Retirement Savings in Favor of Debt Reduction
"Strive to strike a balance between paying off debt and saving money," Galstyan said.
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42. Know Where To Get Health Insurance
"You are not eligible for Medicare until age 65," Kavehrad said. "You may need to look to COBRA or the Health Insurance Marketplace. If you are a Health Insurance Marketplace enrollee, you may be eligible for the Premium Assistance Tax Credit."
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43. Stay Up-to-Date on Legal Developments
"The possibility that what is today might not be the same tomorrow is one of the significant obstacles to planning for the future," Galstyan said.
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44. Consider Part-Time Work
"Explore other ways to bring in additional income, such as part-time work or freelance opportunities," said Kline. "Consider continuing to work after you retire to supplement your nest egg."
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45. Save Your Raises and Bonuses
"This method can be relatively painless since the raises/bonuses are not a part of your existing accounted for income, making them out of sight, out of mind," said Kendall Clayborne, certified financial planner at SoFi.
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46. Avoid High-Interest Debt
"By avoiding high-interest debts, we can save more, allowing us to reach our goals faster," said Clayborne.
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47. Save or Invest in Accounts Outside of Your Retirement Plan
"It is a good idea to invest some money in a taxable account or a Roth IRA account, giving yourself a pool of money to draw from before you are able to access your retirement funds," Clayborne said.
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48. Consider Maxing Out Your Retirement Plan Each Year
Take advantage of annual compounded returns by contributing the maximum to your retirement plans each year.
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49. Plan To Avoid Retirement Withdrawals at First
"Tapping into your retirement nest egg early can cost you," said Kavehrad. "If you retire before age 59 1/2, you will typically pay a 10% early withdrawal penalty from most tax-deferred accounts, such as a traditional IRA or 401(k)."
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50. Be Willing To Retire Later
If you were planning to retire this year, for instance, it wouldn't be the best choice because you would probably have to budget more money for expenses due to inflation than what you planned for. Instead, always be willing to be flexible, keep investing and postpone your retirement by a few years if necessary.
