Are you one of the smartest who can retire at the 50’s and below? Yes, there are people who contributed a significant amount to their retirement plans in their early 20’s or 30’s, so they could retire at the age of 50.
However, if you aren’t one of the few and you’re turning 50 this year, then you need to capitalize on what experts say when you reach 50. What was that? Catch up. Yes, one of the most important things 50’s can do for their retirement savings is to catch up. So today, we’ll be talking about the Top Financial Tips – Catching Up for 50’s.
Notice that even the industry demonstrates this – employer-sponsored retirement accounts and individual retirement accounts have this so-called “catch-up contributions”. This will allow investors to put away more money in their accounts beginning the year that investor turns 50.
This is basically because the majority of the population, not only in the United States but also around the world, are undersaved when they reach retirement. By your 50’s, you should have saved four or five times your annual salary in order to ensure your stress-free retirement – according to the experts. Unfortunately, there are a lot of people just can’t afford to retire yet because of undersaving for retirement in their earlier years.
People are expected to live longer in the future. So in reality, future retirees need to push away anxiety over potential money problems and get to business. Take into account all expenses you’ll possibly incur in retirements, such as health-care costs and bills and save, so you’re not one of the many people who is undersaved for retirement. That being said, you need to take small steps in your 50’s to get to where you’d like to be in the future.
You may not be able to hit the number you were hoping for, but any number or amount you add now will definitely improve your lifestyle in the long run. You have to think of it incrementally.
At your 50s, you’ve probably been working hard for your money in decades by now. To have a stress-free retirement is a great goal, so you need to make the most of your finances and retirement planning. You can start with determining the appropriate age to retire, becoming familiar with health insurance, like Medicare, and understanding your pension and how it’s protected.
Midlife is indeed filled with challenges and opportunities. Your children might be financially independent and earning their own money soon or any kids related costs should be behind you – or so you hope. While losing your job maybe a bigger risk now that you’re older, you’re also likely at the peak of your career at your 50’s.
Experts say that when you’re making the most is also when you should squirrel away most. According to studies conducted by Hearts & Wallets, some 40% of successful savers – built nest eggs equivalent to 10 times pay – did so by saving 15% or more of their incomes for at least 10 years. So, Here are the Top Financial Tips – Catching Up for 50’s:
Top Financial Tips – Catching Up for 50’s
- 1 1. Forget Your Bonuses.
- 2 2. Catch-up Contribution And Imagine Your Future.
- 3 3. Shift More Heavily To Savings Rather Than Debts.
- 4 4. Children’s Education And Student Loan.
- 5 5. Aggressive Asset Allocation.
- 6 6. Consider Real Estate Investment.
- 7 7. Update Your Will And Testament.
- 8 8. Optimize Your Career Opportunities.
- 9 Final Thoughts:
1. Forget Your Bonuses.
Bonuses have probably helped you buy a house a decade ago. But now, you need your bonuses to shore up your future. The most successful “burst savers” socked away any income the norm, such as bonuses, raises, and commissions. They put everything to their retirement savings and other monetary investments.
2. Catch-up Contribution And Imagine Your Future.
Looking at your projected Social Security benefits and your savings accounts relative to your goals may tell you that you have some catching up to do. Remember your age. The year you turn 50, you can start making catch-up contributions to your retirement plans.
Fortunately, the government offers some catch-up opportunities. You can choose in the form of additional tax-deferred retirement contributions to 401(k) or individual retirement account (IRA) plans that you can make once you turn 50. Use this as an incentive to start making extra contributions. And never touch your retirement savings afterward.
Look into your future and don’t let your energy flag now. You need to stay motivated to save, envision yourself in 20 or 30 years. According to studies, people who feel connected to their future self-are more willing to wait for a reward. You can create an aged picture of yourself and imagine how you want your life to be in that given age.
3. Shift More Heavily To Savings Rather Than Debts.
Early in your career, accumulated savings are probably to be modest and it might seem you’re taking out one loan after another, such as student loans, car loans, mortgages etc. When you reach the age of 50, you should have tremendously reduced your debt burden. You should be seeing a growing portfolio of retirement assets.
This is the type of the trend that can feed on itself: the more you eliminate your debt, the more of your monthly budget can go to savings rather than loan payments.
4. Children’s Education And Student Loan.
Make sure that your children graduate on time. Most students take five or six years to finish college. So, if you budgeted it for only four years, then you’ll end up a deficit. To avoid footing the bill for another year or two of tuition, check that your child is carrying the max course load. The tuition fee is quite expensive, and it probably becomes more expensive every single year. If you didn’t save any college funds for your children this time, and you probably get tempted as college costs hit.
Resist. Hands off your retirement savings. Here’s why:
If you’re saving a steady 8% from age 25 – with a salary of $30,000 that rises 2% a year, then you could have $1.3 million at the age of 65. If you take a $10,000 loan at the age of 33 for a home, a $10,000 student loan at 50 for college for your child, and make a $10,000 early withdrawal at 62, and that $1.3 million will drop to $930,000.
However, saying no to your kid is hard, that’s why parent PLUS loan balances have doubled over the past 10 years. There are two options you can choose. Either you acquire a loan which is payable within 10 years or before your retirement, OR let your child obtain the student loan and help him pay the loan.
5. Aggressive Asset Allocation.
People often think that their investment should be more conservative as they get older, but age 50 is too soon to throttle back to a less growth-oriented asset allocation. At his age, you’re still more than a decade away for retirement. You still have the time horizon of 30 or more years ahead of you, so investment is still a good idea at 50’s. Plus, if you’re contribution heavily to your retirement plans, this positive cash flow will help smooth out some of the volatility from the growth of investments.
Make sure you dig in and minimize your investment fees. According to studies, approximately around 60% of investors think that their advisers are free or have no idea how much they pay for their services. Figuring out this out can be difficult, especially if you own annuities or face layers of fees. i.e. 1% for the adviser plus extras for the actual investments. Ask your adviser or a pro to sell out every cent so you can evaluate if the service is worth the price.
6. Consider Real Estate Investment.
Lots of real estates markets have bounced back, but there are still places where it pays to buy investment property. Look for strong population growth and low unemployment, which spur rental demand. This is can be a great investment diversification and you can build a great passive income before you retire. The good thing is, you still can continue this business after retirement as it requires minimal of your time.
However, some people don’t like the hassle of being a landlord. In this case, you can either hire a landlord or investment with Real Estate Investment Trust (REIT). REIT is a financial institution that owns and normally operates income-producing real estate. REITs own many types of commercial real estate, such as office, apartment buildings, warehouses, hospitals, shopping centers, hotels, and timberlands. Some REITs engage in financing real estate. Contact your bank advisor for the best recommendations to your portfolio.
Other important financial tasks at the age of 50’s:
7. Update Your Will And Testament.
If you made you your will and testament when you started your family, you might find things are tremendously different by the time you turn 50. Essentially, reviewing your will and testament advisable every 10 years. However, if you haven’t done it so, this is one of the financial tasks you need to do when you reach 50.
8. Optimize Your Career Opportunities.
Since these years can be your peak earning years, assessing your careers opportunities can be a great idea. Some companies are looking for more experienced individual and offer a higher salary, better compensation, and benefits or even a better career development.
So, you should assess whether your current employer is the best place to capitalize your peak earning years or whether you could do better somewhere else. Remember to negotiate with your current employer before you decide to sign a new employment contract.
In a youth-oriented culture, you could be easily overwhelmed and start to feel a little bit over the hill by the time you turn 50. But when it comes to wealth building, your 50s are the prime time of your life. This is a period when you can emerge from debt, enjoy your peak earning years and start to see your investments tremendously accumulate and make a serious contribution to your net worth.
Obviously, with a proper attention to your personal finances, at the age of 50’s could be your greatest decade for building wealth. Essentially, it is too late for procrastination and too early for slowing down. This is your ultimate prime time.
I hope you enjoyed this article “Top Financial Tips – Catching Up for 50’s”. If you have any other financial tips for 50’s, comment or question, please feel free to write them below. Good luck to your journey to financial freedom and God bless.