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Your plan for retirement in your 50s has tools available to it that didn't exist in your younger years.
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When it comes to your plan for retirement, your 50s can be a great time to put the finishing touches on your savings. Once you hit 50, you can take advantage of "catch-up" contributions in your IRA and your employer-sponsored retirement plan to sock away thousands more in a tax-deferred manner. In an IRA, you get an additional $1,000 in catch-up contributions, which brings the total allowed amount to $6,500. In a 401(k), you get an additional $6,000, bringing the total allowed amount to $24,000.
In addition to the stepped up contributions, you can start withdrawing money from your retirement plans while you're still in your 50s without paying the additional 10% tax on early withdrawals. For an IRA, those withdrawals start at age 59-1/2, while for a 401(k), they can start as early as age 55, if you're at least that age when you separate from service from your employer.
What if you haven't finished your plan for retirement in your 50s?
That combination of catch-up contributions and the start of your ability to take withdrawals reflects the fact that by the time you reach your 50s, you're expected to be well along your retirement plan journey. If you started young and invested consistently, then you would simply 'top off' your plan with the help of your catch-up contributions, then use the lower taxes on withdrawals to start living in retirement.
Yet not everyone reaches their 50s with a nearly complete retirement plan. According to the Federal Reserve's 2013 Survey of Consumer Finances, households headed by a person aged 45-54 had a median net worth of around $105,000, while those headed by a person aged 55-64 had a median net worth of around $166,000. That means half of households have a higher net worth, and half have a lower net worth. Also, while that's a respectable amount, it's likely not enough to fully fund a comfortable retirement.
If you find yourself in your 50s with a plan that still needs some help, don't despair. You can still find a path to a successful retirement, but understand that it may look a little different than you originally hoped it would. Here are some of your options:
Make your 50s the time to get your retirement plan on track
Your 50s can be a great time for your retirement plan. Between your likely highest-ever earnings, the catch-up contributions available to you, and the fact that you still have time to make adjustments, a comfortable retirement is still in your reach. Still, time is running short for you to secure a comfortable future for your golden years, so get started now. Once you do reach retirement, you'll be incredibly grateful for the time, money, and effort you put toward your plan today.