A few generations ago, if you were in your 50s, you were likely on the downhill slide to retirement, with most big financial decisions in the rearview mirror.
But Americans are living and working longer, and a 50-something may have nearly half a life ahead. Fifty-somethings are likely in their peak earning years, and decisions now could pave the financial road for several years to come.
Here’s some advice from professionals about making sound financial decisions after hitting the half-century mark.
Planning for life once that full paycheck is gone still should be at the forefront of financial strategy for 50-somethings, according to financial advisors.
The first thing to do is take a step back and re-evaluate retirement goals, said AJ Smith, vice president of financial education at SmartAsset.
Maybe you set a strategy when you were 30, including how much you’re putting aside each month for retirement. If it was a “set it and forget it” thing, you may want to take a new look, she said.
Goals — and life realities — may have changed.
“It’s important to re-evaluate; what is the vision?” Smith told Benzinga. “It might be the same, it might have changed.”
While your financial situation may be different than expected — maybe you saved more than you thought or a lot less — it’s also possible your ideas about how to spend your later years have changed.
You might have become passionate about something that you want to keep working on rather than completely retiring. Your health situation may have changed. Your grown kids’ lives may have you thinking about moving.
“The biggest thing is to sit down again and decide what you’re looking for now: what retirement means to you,” Smith said.
Catch Up By Investing More
If you’re behind in terms of how much you want to have for retirement, being 50 brings a good chance to catch up because of IRS rules.
Starting at 50, you can put an additional $1,000 in your IRA above what the IRS allows younger folks to contribute in a year. And at 50, you can put an additional $6,000 in your 401 (k) over a year.
That means you could invest $7,000 in an IRA instead of the $6,000 annual limit for younger people, and you can put up to $25,000 into your 401(k) in one year.
“If you’re in your 50s, it’s a good time to make some serious plans for getting out of debt, and staying out of debt,” says Charlotte Dougherty, a certified financial planner in Cincinnati. That means saving up for big expenses, rather than digging a deeper hole by putting them on a credit card.
In your 30s, health costs probably weren’t top of mind, but now they may be. You’re still a few years away from Medicare eligibility at 65, though.
Dougherty suggests looking into a health savings account, which has tax benefits in addition to being a savings tool.
“Think of it as a medical IRA,” she said, adding that it's a possible source of money that could be available later if it goes unused.
Push The Kids To Get A Job
One way to watch your money drift away in your 50s is to keep supporting your kids as you did when they were younger.
Almost eight out of 10 parents with adult children are still paying living expenses for offspring, according to Merrill Lynch ’s 2018 “Financial Journey of Modern Parenting.”
And many people in their 50s made it without much parental help, so they’re paying twice for things they thought they’d only pay once for, like college educations or weddings.
“A couple generations ago, when you reached the age of majority, you were launched,” Dougherty said. “Your parents said, ‘bye bye, good luck.’”
Parents with adult children now bank everything from rent to cell service to college to the tune of $500 billion a year, or twice what they put into their own retirement accounts — forgoing their own expenses and retirement savings.
It's bad for parents and bad for kids, Dougherty said.
“That’s not the lesson we want those kids to learn,” she said. “We want them to be financially independent too.”
Find Good Advice
Both Dougherty and Smith acknowledge you can do your own financial planning, but said it’s better to have a professional help you figure out how to meet your goals.
And what if you haven’t been the best saver, or haven’t gotten started at all as you get into your 50s? Don’t let that stop you from getting going.
Yesterday would have been good. But it’s gone.
“Today,” Smith said, “is better than tomorrow.”
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