Age 50 is a pivotal one. You're well-established in your career, you're potentially an empty nester, and you're finally starting to count down the years until retirement kicks off. As such, you'll want to pay attention to how you're doing financially at this stage of life. Here are a few key milestones you should reach by the time your 50th birthday rolls around.
1. Have a fully loaded emergency fund
The last thing you want to do is rack up costly debt during your 50s and risk carrying it with you into retirement. That's why you should really have a solid emergency fund by the time you turn 50 -- one with enough money to pay for three to six months of essential living expenses. This way, you'll have cash reserves to tap into in the event you encounter a massive home repair, a major problem with your car, or a medical issue that leaves you with a mountain of bills.
Just as importantly, your emergency fund can get you through a period of unemployment later in life. Unfortunately, it's generally more difficult to recover from the loss of a job when you're older than when you're younger, so having savings buys you the option to search for a new position calmly without having to settle out of desperation.
If you don't have much or any money in the bank, your best bet is to cut back on living expenses to free up cash to save. You can also look into getting a side job to boost your income, thereby making it easier to build that safety net.
2. Have a decent-sized nest egg
Being 50 means that retirement isn't all that far off. Therefore, you should have a nice chunk of savings in an IRA or 401(k) by that age. Investment giant Fidelity recommends having six times your salary by 50, so if you're earning $100,000 a year, you should have $600,000 in your nest egg. If you don't, consider it a wake-up call to ramp up.
The good news is that once you turn 50, you're allowed to make catch-up contributions in your IRA or 401(k). For the former, you get a $1,000 catch-up that brings your annual contribution limit up to $7,000. For the latter, you get a more generous $6,000 catch-up that brings your total contribution limit for the year up to $25,000.
Even if you can't manage to max out a 401(k) or take advantage of a full $6,000 catch-up, you should aim to boost your savings by at least an extra $1,000 a year if you're currently behind. To free up that cash, you can once again cut back on expenses or get a second gig on top of your main job. Incidentally, 14% of workers with a side hustle have one for the express purpose of saving for their golden years.
3. Be credit card debt-free
It's one thing to carry mortgage debt into your 50s, but credit card debt is something you'll want to rid yourself of sooner. The longer you hang onto credit card debt, the more money you'll waste on interest -- money that could otherwise serve a better purpose, like boosting your IRA or 401(k).
If you're approaching 50 with a pile of unhealthy debt, come up with a plan to quickly knock it out. Reducing your spending to free up cash and getting a second job will, once again, help you achieve this goal. But also, tackle your debt efficiently. If you owe money on several credit cards, pay off the one with the highest interest rate first. Or, try transferring your various balances to a card with a lower interest rate on the whole.
The closer you get to retirement, the more important it is for you to be financially secure, and that means having an emergency fund, the start of a nest egg, and a debt-free existence (other than mortgage debt). Focus on hitting these milestones by 50 and you'll be sitting pretty by the time your golden years roll around.
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