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

    Suddenly Pushed into Retirement, How to Handle the Transition

    Adjusting to retirement can be challenging, but when it happens unexpectedly it can be downright difficult. Thankfully there are ways to successfully transition.
  8. Investing

    What a Family Tradition Taught Me About Investing

    We share some lessons from friends and family on saving money and planning for retirement.
  9. Retirement

    Two Heads Are Better Than One With Your Finances

    We discuss the advantages of seeking professional help when it comes to managing our retirement account.
  10. Retirement

    5 Secrets You Didn’t Know About Traditional IRAs

    A traditional IRA gives you complete control over your contributions, and offers a nice complement to an employer-provided savings plan.
  1. When can catch-up contributions start?

    Most qualified retirement plans such as 401(k), 403(b) and SIMPLE 401(k) plans, as well as individual retirement accounts ... Read Full Answer >>
  2. Are 401(k) contributions tax deductible?

    All contributions to qualified retirement plans such as 401(k)s reduce taxable income, which lowers the total taxes owed. ... Read Full Answer >>
  3. Are 401(k) rollovers taxable?

    401(k) rollovers are generally not taxable as long as the money goes into another qualifying plan, an individual retirement ... Read Full Answer >>
  4. Are catch-up contributions included in the 415 limit?

    Unlike regular employee deferrals, catch-up contributions are not included in the 415 limit. While there is an annual limit ... Read Full Answer >>
  5. Can catch-up contributions be matched?

    Depending on the terms of your plan, catch-up contributions you make to 401(k)s or other qualified retirement savings plans ... Read Full Answer >>
  6. Are catch-up contributions included in actual deferral percentage (ADP) testing?

    Though the Internal Revenue Service (IRS) carefully scrutinizes the contributions of highly compensated employees (HCEs) ... Read Full Answer >>

You May Also Like

Trading Center