A cruel irony of retirement saving is that the best time to start is when you're so young that retirement is almost unimaginable. That's when time is on your side.
By your 50s, time to prepare for retirement is in short supply, which has a tendency to focus the mind.
"In a way I think financial planning with 50-year-olds is easier because they are more willing to think about these things," Stephanie Matthews says. "People want it, and they are ready for it mentally."
Matthews is a financial planner and director of financial wellness at Aptus Financial in Little Rock. In this article, she continues the work of her retired colleague Linda Bessette, who offered The Work Wife readers tools for people in their 20s, 30s and 40s.
Mental readiness is helpful in coming up with a plan of action — including actions that aren't particularly pleasant.
"We have to get over the idea that we can have it all at the same time," Matthews says.
Here are her steps for financial wellness at the half-century mark.
1. Catch up on savings. Saving for retirement is always Job One, regardless of age, and people who reach their 50s with a solid history of saving specifically for retirement are obviously in a better position than those who have not.
"For women who have been on top of their finances for all their working lives, it's probably not scary, the thought of retiring," Matthews says.
But for women who have procrastinated, she has comforting words: "It's not too late. We see people do it every day."
But it won't be fun.
"If they haven't saved for retirement, they need to catch up by saving at least 30% of their gross income. They can use the Vanguard retirement calculator if they need to catch up to figure out exactly how much to save."
2. Deleverage. This means paying down debt with a goal of being debt-free by the day you plan to stop work.
"It's very difficult to retire with debt," Matthews says.
She agrees with the standard advice of paying off the highest-interest debt first, which generally means credit cards, then auto loans, then mortgage. But mortgage debt can be so large and so long that it needs special attention.
"Home debt is the biggest piece of debt that prevents people from retiring," Matthews says.
If you are on track to pay off your mortgage by the time you plan to retire, you're in good shape. But if you are in your 50s and took on a 30-year mortgage fairly recently, you need to plan to pay more each month in order to pay it off sooner.
If your current mortgage interest rate is lower than the current market rate, "don't refinance," Matthew says. Instead, "Do a mortgage calculator to factor in how much your payments have to be each month to have the house paid off by your target retirement date."
3. Manage cash flow. "Have control over finances instead of finances controlling you," Matthews says. "Give all of your dollars a job. I recommend always accounting for vacations, car repairs and home repairs."
Making sure money is not slipping away will help you pay down debt, increase your savings or both. And it will also help you be prepared for cash management in retirement.
"When you have a fixed income, you don't have the ability to smooth out big purchases like you do when you have a salary or bonuses. With a fixed income, you need to be able to budget every single month for the bigger expenses that will eventually come up."