10 Key Retirement Checkpoints to Reach by 55

10 Key Retirement Checkpoints to Reach by 55

Planning for retirement isn’t something you can do overnight. By age 55, you’re entering the home stretch of your working years, making it the perfect time to assess your readiness. Are your finances on track? Have you thought about healthcare? What about your vision for those golden years? Taking stock now gives you time to course-correct if needed and enter retirement with confidence.

1. Eliminate High-Interest Debt

Avoid letting debt steal your retirement comfort. “Credit card balances, personal loans, and auto payments can drain your fixed income faster than a leaky faucet wastes water.” Attack the costliest debts first to regain control.

Your mortgage deserves special attention too. Having it paid off by retirement means one less major expense each month. If that’s not realistic, consider refinancing to lower payments or downsizing to a less expensive home.

Remember those student loans you might still be carrying—even ones for your kids? Now’s the time to accelerate payments or explore forgiveness options.

2. Build Your Emergency Safety Net

Life throws curveballs even as retirement approaches. An emergency fund acts as your financial shock absorber, preventing you from tapping retirement accounts during unexpected crises. Aim for 6-12 months of essential expenses tucked away in an easily accessible account.

Medical emergencies become more common as we age, making this buffer especially important. Home repairs don’t magically stop either—roofs leak, furnaces fail, and appliances break down with frustrating regularity.

Keep this money separate from your retirement accounts and investment portfolio. The goal isn’t growth but accessibility when you need it most. A high-yield savings account offers the perfect balance of safety and modest returns without market risk.

3. Maximize Retirement Contributions

Did you know “at 50+, the government gives you a gift—catch-up contributions”? For 401(k)s, that means an extra $7,500 in 2023, plus $1,000 more for IRAs—perfect for closing gaps in your savings.

If your employer offers matching contributions, capture every penny of this free money. Check whether your company provides after-tax contribution options or mega backdoor Roth conversions for even more tax-advantaged saving opportunities.

Don’t forget about Health Savings Accounts if you have a high-deductible health plan. HSAs offer triple tax advantages: tax-deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses—a powerful retirement healthcare supplement.

4. Create Your Retirement Vision

Dreaming about retirement isn’t just fun—it’s essential financial planning. Where will you live? Will you travel or stay local? Maybe you’ll start that woodworking hobby or volunteer at the animal shelter.

Your vision affects how much money you’ll need. A quiet life in your paid-off home costs less than globetrotting adventures. Start sketching this picture now, including where you’ll live and what will fill your days.

Talk with your spouse or partner too. Surprising how many couples realize they have completely different retirement dreams! Getting aligned now prevents disappointment later when your paths diverge.

5. Check Your Savings Benchmarks

Use the guideline of “7-8 times your annual salary saved by age 55” as a checkpoint for your financial health. Falling behind means it’s time to revisit your budget, savings rate, or retirement plans.

Your personal target depends on several factors—desired retirement age, expected lifestyle, and other income sources like pensions or rental properties. Someone planning to work until 70 needs less at 55 than someone eyeing retirement at 62.

Don’t panic if you’re behind. Many Americans boost their savings significantly in their final decade of work. Consider whether part-time work in early retirement might help bridge any gaps while allowing your investments more time to grow before full withdrawal.

6. Secure Your Healthcare Strategy

Navigating healthcare between ages 55 and 65 is a major challenge. “The decade between 55 and Medicare eligibility at 65 represents your healthcare planning danger zone,” especially if you leave work early and must find expensive private insurance.

Explore options like staying on your employer’s plan through COBRA (typically limited to 18 months), joining your spouse’s insurance, or purchasing marketplace coverage. Some employers offer retiree health benefits—a valuable perk worth investigating.

Healthcare costs frequently shock new retirees. Fidelity estimates a 65-year-old couple needs $315,000 saved just for medical expenses in retirement, beyond what Medicare covers. Start researching supplemental plans and considering how healthcare fits into your retirement budget now.

7. Rebalance Your Investment Portfolio

Your investment strategy should evolve as retirement approaches. The old rule of subtracting your age from 100 to determine stock percentage still offers a starting point, though many financial advisors now suggest 110 or 120 minus age for longer retirements.

Assess whether your current allocation matches your risk tolerance and timeline. Market downturns hit harder when you’re near retirement with less recovery time. Consider whether you need to dial back risk while still maintaining enough growth potential to outpace inflation.

Beyond stocks and bonds, evaluate alternative investments like REITs or annuities that might provide income stability. This decade before retirement represents your last major opportunity to adjust course while still having earning years ahead.

8. Map Out Your Future Income Streams

Retirement resembles building a sturdy table—you want multiple legs supporting your income needs. Social Security typically replaces only about 40% of pre-retirement income for average earners. Where will the rest come from?

Create an inventory of all potential income sources: pensions, rental properties, part-time work, business interests, annuities, and systematic withdrawals from retirement accounts. Estimate monthly income from each to see if they’ll cover your projected expenses.

Consider the timing of different income streams too. Delaying Social Security until age 70 increases your benefit by approximately 8% annually beyond full retirement age. Some pension options offer survivor benefits at reduced monthly amounts—decisions that require careful consideration now.

9. Update Your Estate Plan

By age 55, many realize estate planning is more than a formality. “Estate planning isn’t just for the wealthy—it’s for anyone who wants control over their assets and healthcare decisions.” Updating your documents ensures they match your current life situation.

Review beneficiary designations on retirement accounts and insurance policies. These designations override your will, a fact that surprises many people. Ensure your power of attorney and healthcare directives reflect your current wishes and relationships.

Consider whether a trust might help avoid probate or provide for special situations like disabled dependents or spendthrift heirs. Meeting with an estate planning attorney now gives you time to implement sophisticated strategies if needed.

10. Test-Drive Your Retirement Budget

Many pre-retirees discover their spending patterns differ significantly from their expectations. By following the advice to live on your retirement budget beforehand, you can avoid surprises and better plan your financial future.

Track every expense during this trial period. Categories like dining out, entertainment, and travel often surprise people. Healthcare costs frequently increase while commuting expenses decrease. Housing maintenance sometimes rises as you spend more time at home.

Pay special attention to periodic expenses that don’t occur monthly—insurance premiums, property taxes, holiday spending, and home repairs. These irregular costs derail many retirement budgets when not properly anticipated and spread across monthly planning.