By Shirley Pulawski

Stay on track with – or get ahead of – your retirement goals, and take time to reevaluate your targets. Is the annual amount you originally planned to live on during retirement realistic? Don’t assume you will be able to afford to live on less than you spend now. According to Forbes, by 45 years of age, about three times your annual salary should be socked away in savings. Are you on track?

Not having a healthcare fund to use in retirement

Medicare doesn’t cover all expenses, and co-pays can be pricey, so include plenty of money in your budget for health expenses. Even minor or treatable illnesses can be expensive, and even if you’ve spent your lifetime being very healthy, some degree of health expenses will likely appear during retirement. Plan for the worst and have plenty budgeted for healthcare costs.

Not moving away from riskier investments

Assuming you’ve accrued a significant amount of savings at this point, it can be time to move toward a slow and steady approach to retirement investments. Talk to your 401(k) administrator about the kinds of funds into which you’ve invested and discuss a strategy designed for the long term. Generally, it’s safer to invest in higher-risk, potentially higher payoff stocks in one’s 20s and 30s when there is less to lose. In your 40s, it's better to take a more conservative strategy.

Not maxing out retirement contributions

If you’re in your 40s and feeling financially secure, it is time to start contributing more to your retirement fund. Maximum 401(k) contributions are $15,500 for most adults under 50, and if you’re able to meet this annual target in contributions, you should do it.

Having too much credit card debt

If you have large amounts of revolving credit, it’s time to stop pretending that eventually credit cards will be paid off, especially if “eventually” is still some undefined time in the distant future. The cost of interest on these debts is probably enormous, and it’s time to pay them off.

Consider significantly upping your monthly payment amounts, or consolidate the debts into a lower-interest home equity loan if you have significant equity in your home, and take the loan for only the amount you need to pay off the cards.

Don’t use a home equity line of credit (HELOC) if you don’t have good spending habits with credit and you think you will be tempted to keep charging more. However, if you’re planning any major home improvements, replacing appliances, or other larger expenses, a HELOC might be a good choice for you. If taking out a home equity loan maxes out your equity, then making larger payments on the cards might be a better plan.

If you do decide to use home equity to pay off the debt, develop a payment plan (not the minimum payments) to get the loan paid down long before retirement. Once the cards are paid off, it shouldn’t hurt your credit score to close a few of the accounts up. To keep an active credit history, you’ll want to keep using a few of them and paying them off right away. Any large purchases should be paid off within three months to avoid paying too much in interest.

Not having significant equity on your home

Most people plan for retirement assuming they’ll no longer have a mortgage payment in their golden years. However, as discussed, many Americans have turned to the equity in their homes to pay off debt, or have relocated, or have watched their homes decline in value. Take a look at the numbers -- are you on track to have your home paid off by retirement or when you plan to sell it? You don’t want to wake up in your 50s to suddenly realize mortgage debt will follow you into retirement, so get a plan together now if you’re on this path.

Living without an emergency fund

Maybe it’s been a while since a major expense has come up which took your wallet by surprise, and you’ve managed to always have enough set aside for problems. However, if you don’t have a separate fund set allocated just for emergencies, one that isn’t also used for vacations and car repairs, now is the time to set one up.

Not purchasing life insurance now

The cost of opening a new life insurance policy goes up with age, so it’s best to start a with a good policy early on. It’s also a good idea to increase the amount of coverage on existing policies before you turn 50, when doing so will likely cost much more. Take advantage of being in a lower risk pool and get covered.

Related Articles
  1. Budgeting

    Stop Keeping Up With The Joneses - They're Broke

    Conspicuous consumption could be robbing you of future wealth.
  2. Budgeting

    How To Manage Lifestyle Inflation

    Learn how to manage your finances so that making extra money actually equates to getting ahead.
  3. Budgeting

    Financial Risks That Don't Pay Off: The Cost Of Reckless Financial Behavior

    Despite the recessions, citizens continue to take financial risks and spend outside of their means without fully appreciating the potential consequences for both themselves and the wider economy.
  4. Budgeting

    How To Break Your Bad Financial Habits

    If the current level of economic growth is to be maintained and improved upon, citizens must play their part by practicing responsible spending and borrowing.
  5. Personal Finance

    3 Financial Tasks We Think Are Harder Than They Really Are

    Use these three tips to help put your financial situation into perspective. It turns out, organizing your finances isn't nearly as hard as you thought.
  6. Options & Futures

    10 Simple Steps To Financial Security Before 30

    Find out how to reach your long-term goals without becoming a tightwad.
  7. Retirement

    5 Great Timeshare Locales for Retirees on a Budget

    For retirees on a budget, there are affordable timeshares located in charming towns that don't cost a fortune for vacation time.
  8. Retirement

    The 5 Best Retirement Communities in Asheville, N.C

    Learn about some of Asheville, North Carolina's best retirement communities and discover why the area is such a popular retirement destination.
  9. Taxes

    Here's How to Deduct Your Stock Losses From Your Tax Bill

    Learn the proper procedure for deducting stock investing losses, and get some tips on how to strategically take losses to lower your income tax bill.
  10. Retirement

    Why Are Annuities Important for Retirement?

    Understand how annuities work, and identify the benefits they provide for retirement, the most salient being a guaranteed income stream for life.
  1. What are the main kinds of annuities?

    There are two broad categories of annuity: fixed and variable. These categories refer to the manner in which the investment ... Read Full Answer >>
  2. What are the risks of rolling my 401(k) into an annuity?

    Though the appeal of having guaranteed income after retirement is undeniable, there are actually a number of risks to consider ... Read Full Answer >>
  3. How do I get out of my annuity and transfer to a new one?

    If you decide your current annuity is not for you, there is nothing stopping you from transferring your investment to a new ... Read Full Answer >>
  4. How can I determine if a longevity annuity is right for me?

    A longevity annuity may be right for an individual if, based on his current health and a family history of longevity, he ... Read Full Answer >>
  5. How does a Roth IRA grow over time?

    Your Roth IRA account grows over time thanks to two funding sources: contributions and earnings. While your contributions ... Read Full Answer >>
  6. Can my 401(k) be seized or garnished?

    As long as your retirement funds are held in your 401(k) and you do not take them as distributions, your 401(k) cannot be ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!