For many people, turning 50 represents a change in how they approach their finances. If you have children, they may be preparing to leave the nest and you may be taking a step forward in terms of your earning power. It’s time to step up our efforts. Whether you’re a late bloomer or have been spending money steadily over the years, here’s what you can do to enjoy a bountiful retirement.
A financial advisor can help you create a financial plan tailored to your needs and goals in your 50s and beyond.
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1. Take advantage of all your savings options
A 401(k) (or a plan offered by another employer) is a good starting point for retirement savings, but it’s not the only way to make a nest egg. If your employer’s retirement account is maxed out, you can cover it with an IRA.
The regular 401(k) and IRA contribution limits for 2023 are set at $22,500 (from $20,500 in 2022) and $6,500 (from $6,000 in 2022), respectively. However, if you are over 50, you will receive a bonus in the form of a catch-up donation. So, in addition, he can put $7,500 (up from $6,500 in 2022) into his 401(k) and he can put $1,000 into the IRA.
In addition to these two options, there is another way to save if you have a health insurance plan with a high deductible. Save up to $3,850 in Health Savings Accounts (HSAs) for individual plans in 2023 (up from $3,650 in 2022) and $7,750 for family plans (up from $7,300 in 2022) . When you turn 65, you can use this money without penalty, but you’ll be taxed on any distributions that aren’t used for eligible medical expenses.
2. Pay off debt strategically
Carrying credit card balances, student loans, or mortgage debt into retirement is dangerous, especially when you know your income will be reduced if you stop working. In your 50s, it’s best to focus on eliminating as many financial obligations as possible so you can enter your golden age on a streamlined budget.
That said, there are some rules to follow when it comes to paying off debt. Before you start making monthly payments, it’s important to make sure you’ve exhausted your retirement account. At this stage in life, you can’t afford to delay saving.
While you’re paying off debt, you can tackle the most burdensome things first. Then you can look for ways to make other payments cheaper. For example, if you have a credit card, you may save interest by switching to a card with a lower interest rate. If you’re thinking about refinancing your mortgage, it’s a good idea to run the numbers to get an idea of how much you can save.
3. Carefully manage risk
Having money in a savings account gives you peace of mind, but it doesn’t make you rich. Investing in stocks and mutual funds means taking bigger bets, but can yield big returns in the long run.
If you’ve been fairly aggressive with your investments up to this point, you may need to rethink your strategy. People in their 30s with a few years to retirement are in a better position to bounce back from market downturns than those in their mid-50s.
That’s why I recommend looking at your portfolio’s asset allocation to see where your money is concentrated. If you are still heavily invested in equities, now is a good time to start easing towards more conservative investments. Returns may be slightly lower, but the trade-off is more protection against market volatility.
Select a risk profile.
Building wealth is something anyone can do given enough time and the right tools. If you’re in your 50s, retirement isn’t too far away. But it’s never too late to create some financial headroom for your 60s and beyond.
Tips for smart money management
- It’s never too late to reconsider your monthly finances. To get the big picture and understand where you can cut or save, use our free budget calculator and run your own numbers.
- If you’re not sure how to get started or need more guidance, consider working with a financial advisor. SmartAsset’s free tool matches you with up to 3 vetted financial advisors serving your area and allows you to interview advisor matches for free to determine which advisor is right for you. increase. If you’re ready to find an advisor who can help you reach your financial goals, get started now.
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The 3 Steps to Build Wealth in Your 50s post first appeared on the SmartAsset blog.
The views and opinions expressed herein are those of the authors and do not necessarily reflect those of Nasdaq, Inc.