You’ve passed your 50th birthday; now it is time to get serious about saving for retirement! With only about 15 years to save, there is no time to lose. You must begin to ramp up your savings plans. But what is the best strategy for people at this stage of life?
The following tips can help.
Think of Yourself First
You have spent the last 20-plus years taking care of everyone else’s needs. Now is the time to step back and think about yourself. Your kids are grown (or just about there), so they shouldn’t need you as much anymore. Yes, your parents may be growing older, but hopefully they are on their own solid financial footing. There’s no better time to make yourself a priority.
Maybe your son has his heart set on attending a private college (and you only set aside enough money to cover a state school). Guess what – it’s time for him to foot the rest of the bill himself. Or maybe your daughter and her husband have fallen in love with a cute little bungalow in the suburbs. Don’t hand over that down payment. If they can’t afford it on their own, let them wait. The next decade or so is all about you and your ability to save for your own future.
Pay Down Your Debt
Once you hit 50, it is time to stop borrowing money. Better yet, it is time to pay off the debt you already owe as quickly as possible. This includes car loans, student loans, credit cards, and yes, that mortgage.
Imagine how much money you would have to save every month if you knocked out all of that other debt. For instance, if your mortgage alone is $1,200 a month and you were able to invest that money for the next 15 years, you would have an additional $625,000 in retirement savings. Add all of those other payments onto that savings sum and you could retire comfortably without worry.
Now, that may lead you to believe that paying off your mortgage is the best strategy. But, consider the true cost of moving including taxes on the new place, HOA fees, and every other type of expense. Downsizing isn’t always the best financial strategy, especially if local real estate markets are low where you are selling and high where you are planning to buy. Be careful when making this important decision. Timing is everything and if waiting a few more years will bring in more cash, then by all means wait.
Take Advantage of Uncle Sam
If can be hard to build a comfortable nest egg for the future. That’s why the U.S. government allows those 50 and over to sock more away in their IRS and 401K accounts. Beginning at age 50, you are allowed to put away an additional $6,000 (making youth total annual investment $24,000) into your 401K plan. You can invest an additional $1,000 a year into an IRA, for a total of $6,500 every year. If you and your spouse are bale to maximize on these savings options between the ages of 50 and 65, you would enjoy a healthy retirement fund of about $2 million!
Save … Save … Save…
It may sound obvious, but saving every spare dime that comes your way really can add up to a whopping retirement account. Successful savers know the importance of taking bonus monies, tax refunds, annual raises, and other monetary windfalls and investing it. If it is money you weren’t expending to get in the first place, you won’t even miss it once it goes into your retirement account.
Remember, you only have a limited amount of time left to save the funds you will need to enjoy your later years, so plan on savings at least 15% of your annual income once you reach your 50’s.
Create a Plan
It has been said that 80% of reaching any goal is defining what it you want and figuring out how to accomplish it. Sure life’s unexpected happenings will get in the way, but if you are prepared for those detours you will be a better position to weather the storms that come your way. When determining your retirement goals ask yourself these questions:
Once you have a better idea of what you will need once you retire, you will be in a better position to create a plan that will move you towards that goals.
Get Help!
Planning for your financial future can get complicated in your 50’s. This is not the time to make mistakes. That is why it is important to get help from a profesisoal investment planner who can outline several savings strategies that work for you.
Although you may want to meet with the person who will ultimately invest your money for you, it is always a good idea to first speak with a fee only planner whose sole job is to outline a workable plan that you are comfortable with. Since he or she will receive no residual income or commissions on your decisions, they are in a better position to offer the most practical advice.
In most cases, however, most couples in their 50’s will want to follow this simple investment strategy: 65% to 75% in stocks and 25% to 35% in bonds.
Midlife is filled with many opportunities; some of them financial. These are your peak earnings years, so be smart with your money. Learn how to save and invest wisely today so that you can enjoy a financially stable tomorrow.
Regards,
Ethan Warrick
Editor
Wealth Authority
