Managing your finances as you get older is imperative. Making mistakes can be costly. If you’re in your 50s, it’s best to avoid these 12 money moves.
Not Paying Off Debt
Debt, especially high-interest consumer debt can be particularly problematic in your 50s. Your 50s are a time to accelerate wealth creation and credit card debt erodes that possibility.
Empower reports the average credit card balance for a 50-something is nearly $9,300. With increasing interest rates, it can make that debt even more troublesome. Every bit of interest you pay is taking away from your retirement planning. If you have debt, make a plan to pay it off as soon as possible.
Raiding Your 401K to Pay For Your Kids College
It’s honorable to want to help your children through college. Doing so at the risk of your your 401(k) plan, or any other retirement account can put your golden years at risk.
For that matter, taking on any kind of indebtedness yourself for a college education can cause issues in your 50s. It impacts your cash flow and your retirement planning. After all, you can’t finance retirement.
Not Talking About Finances With Your Children
It’s best to keep your children in the dark about your finances as you age, correct? Wrong. Your children are likely older, and potentially out of the house.
Now is the time to start discussing your plans with them. Let them know what your plans and wishes are. Communicate where your documents are. It’s also wise to include them if they’re going to play a part in helping you as you age.
Prioritizing the Wrong Debts
Being mortgage free in retirement is a goal of many in their 50s. However, if you have other, higher-interest debt, you need to prioritize that first.
If you’re carrying student loan debt, that should also be paid off before your mortgage. Social Security income can be garnished for student loan debt so it shouldn’t be overlooked. Furthermore, your mortgage interest rate is likely the lowest of your debt, so it can go last.
Underestimating Future Health Care Costs
Healthcare is expensive. It’s even more so in your retirement years. Reports show the average retiree spends over $300,000 on healthcare costs during retirement.
You still have time to prioritize a healthy lifestyle. Every little bit you do could save you significant sums of cash in the long run.
Not Creating Multiple Streams of Income
Retirees often give up an active stream of income when they leave work. Now is the time to create multiple streams of income to help you weather that upcoming change.
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Avoiding Your Catch Up
The IRS allows people over 50 to contribute more money to their retirement plans. For the 2023 tax year you can contribute an additional $1,000 to your IRA.
In a 401(k) you can contribute an additional $7,500. That may not seem like a lot, but if you don’t retire for another decade that’s a good amount of time for your investment to grow.
Being Led By Fear With Your Investments
The stock market is 90 percent driven by emotion. It’s typically best to avoid allowing what you see in the headlines dictate your investment decisions too much.
As the adage goes, what goes down comes up. If you’re fearful of what is going on in your portfolio, find a trusted advisor who can help you make sense of your plan.
Having the Wrong Type of Life Insurance
Your life insurance needs will likely change as you become older. Don’t take a set it and forget it approach with your life insurance. Additionally, one of the worst money moves to make is to view your insurance as an investment.
Identify the needs of your family, and what’s needed for end of life needs, and adjust your life insurance as necessary. Any premiums you claw back are typically best directed to your investments.
Not Reviewing Your Important Documents
Things change, and life changes along with it. For example, what was true of you 15 years ago may not be so now. Your children are older and you likely you have more assets.
You want to revisit, or begin, your estate planning to make sure it fits your current wishes. The expense of the lawyer is well worth it to create a will and more.
Not Having Enough in Your Emergency Fund
Life is full of the unexpected, even in retirement. Growing a fully funded emergency fund in your 50s is essential.
Your living expenses will likely go down, but having enough in savings will help you manage your budget and avoid potential debt.
Thinking it’s Too Late to Start Planning
It’s rarely too late to start. If you didn’t get off to the start in planning you wanted, don’t let that mistake grow. Start planning now.
You can still save a significant sum of cash in your 50s. Those funds can grow for you over the years to provide the kind of retirement you want.
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