Turning 45 can feel like you still have plenty of time before retirement. But the truth is, the next two decades go by fast. By this age, you’ve likely built some savings and experience, but there’s still room to make changes that can dramatically improve your financial future. We talked to some retired seniors to identify steps that are often skipped or delayed until it’s too late. So here are some steps you should take towards your retirement by the time you’re 45.
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Run a mid-life retirement stress test
By the time you turn 45, it’s no longer enough to guess whether you’re on track. Commit to sitting down and crunching the numbers for what your retirement will actually look like based on your current savings, future needs, and anticipated lifestyle. Consider it a retirement check-up of sorts. Discovering any gaps early gives you 15–20 years to make adjustments instead of trying to play catch-up at 60.
Audit your debt with fresh eyes
Any debt you rack up in your 20s and 30s is, by and large, not that big of a deal. Once you hit 45, though, credit card balances, car loans, and mortgages are often an ugly beast slowly chipping away at your ability to save for retirement and wrecking your credit score. Go over your debt and come up with a plan to chip away at it now before you retire so that it isn’t haunting you when you are no longer working and living off a fixed income.
Reassess your housing situation
If you’re in a mortgage with years left, or a house that is much too big for what you need, start working on a plan to downsize. Wait too long, and housing can gobble up your nest egg. Downsizing or refinancing while you still have time to recover financially will make a huge difference. Plus, your future self will thank you when your fixed income is less impacted by property taxes and upkeep.
Diversify beyond retirement accounts
Many people by age 45 have the majority of their savings in 401(k)s and IRAs. While those accounts are important for retirement, don’t neglect taxable investment accounts or other assets that can give you more flexibility before you’re old enough to tap retirement money without penalty.
Check your health insurance future
Many people don’t realize there may be a gap between when they retire and when Medicare kicks in at 65. Start researching and planning for this gap now, whether through your spouse’s health insurance plan, saving a separate health fund, or exploring private insurance options. If you don’t take care of this, you may end up with huge medical bills when you retire.
Update beneficiaries and legal documents
By age 45, many people have had some major life changes, like marriages, divorces, and children growing up. These life changes can make your retirement account beneficiary designations, wills, and other estate documents outdated. Take some time to review all of these documents so you can ensure your family is properly protected.
Consider catch-up contributions
Most people are not aware that they are eligible to make additional contributions to certain retirement accounts once they reach age 50. Make sure to plan for these “catch-up” contributions so you will be ready to take full advantage the minute you become eligible. Making a few years of extra contributions can make a huge impact on your retirement nest egg.
Plan your retirement lifestyle, not just the numbers
Retirement planning is not just about crunching numbers and saving money. It’s also about having a clear idea of what you want your life to look like in retirement. Start envisioning where you want to live, how you want to spend your days, and what you want to do with your time. By having a clear vision, you can start setting appropriate financial goals and avoid feeling unfulfilled when you stop working.
Protect yourself with long-term care planning
Long-term care costs for assisted living, nursing homes, and in-home health aides are often out of sight, out of mind until a parent or relative is faced with the need. But by 45, it’s time to start planning for your own long-term care needs down the road. You can buy insurance now, earmark savings, or plan for home improvements to stay in place longer.
Build a flexible exit strategy
The traditional retirement age is 65, but what if you get laid off, hit with health problems, or your family needs you at home? Build a “plan B” that includes what you’d do if forced into an early retirement. Having this as your safety net will reduce anxiety and give you confidence no matter how your working years play out.
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