50 may have been viewed as "over the hill" once, but no more. You're still young, vibrant, able, and have lifetime goals to accomplish. You may have young adults or full grown children. You can be well into your career and making payments on a house you bought years ago. Don't let your age daunt you when it comes to the financial missions you still have to complete. You still have time, but it's also a good time to reassess your priorities and your focus.
Money in your 50s is different from money in your 20's, 30's, and 40's. In your 20's, you were just starting out, building a credit score, finding your first debt, and starting your first job. In your 30's, you had a little experience under your belt, started taking on bigger tasks, maybe settled down and started a family. Your 40's found you in the swing of things, getting a better handle of money management, your career, and your retirement goals. Here are a few things that others wished they had known in their 40's:
“In my 40's, I assumed I had plenty of time to focus on retirement, and instead, focused on saving money for my kids to go to college. Once it was time for them to go, they ended up qualifying for several grants and scholarships. While their tuition was paid for, I wasn't anywhere close to where I needed to be to retire comfortably. I had to cut back on a lot of things in order to meet my savings goals.” - Brenda D.
“I wish I would've known I would be divorced when I hit 50. That drastically changed my retirement plans. We had been saving together, maxing out our 401(K)s and IRAs. Well, he took his half and I was left with mine. That means I lost 50% of what I planned on using for my retirement. Unfortunately, I can't retire at the age I originally wanted to. I wish I would've prepared.” - Carol G.
“In my 40's, I was sure I didn't want to travel often. I thought I'd be one of those retirees who sat at home, watching soaps, and waiting for their grandkids to come over. Then I took a trip to Chile and I was hooked! I decided that life was too short not to explore the globe, so I changed my retirement plans and organized a few trips to places I've always wanted to go! It's a lot cheaper than I thought, and a lot more fun than being stuck in the house every day.” - Jessica M.
What 50-somethings Should Plan For (And Why)
When you're in your 50s, you've probably already done a lot of planning in your life. You planned for college, your career, and your family. You worked hard, and now it's time to start winding down and so that you can reap the benefits of your hard work. But it's not quite time to slow to a halt yet, rather, it's time to start planning for other things in the next chapter of your life.
Here are a few things 50-somethings should be planning for, and why:
Plan for retirement. Retirement simply may not have been a huge priority when you were younger, because it seemed so far away. Now you're much closer to your retirement age than when you first started your career. You may have been smart enough to start planning for retirement early, but now's the time to get really serious about it. The first place you should start is a retirement calculator, to figure out how much money you'll need once you're ready to retire. AARP has a wonderful online retirement calculator that will ask you a few questions to determine what to expect in your retirement. These include:
- Your current age to determine how much time you have left to save for retirement
- The age in which you plan to stop working full time (a common retirement age is in your mid 60s so you still have time to save)
- Your gender to determine life expectancy
- Your salary and your partner's salary
- How much you both contribute to retirement
- How much you both currently have in retirement accounts (401(K)s, IRAs, etc.)
- Whether you will receive a significant amount of money elsewhere, from things like settlements, life insurance and inheritances
- Determine social security for you and your partner
- Whether you expect your lifestyle to decrease, increase, or stay the same
From there, you'll have an idea of how much you'll need in order to retire comfortably, how much you'll have saved depending on your answers, and how much more you'll need to save. From there you can adjust your retirement planning accordingly.
Plan for an emergency. Let's face it: things happen. No matter how careful you are, you're bound to see an emergency, even in your 50s. It could be a problem with your car, a repair needed in your home, the loss of a job, the loss of a family member, relocating or divorcing. Having a nest egg or emergency fund is crucial in your 50s.
If you don't have an emergency fund already established, you should start as soon as possible. A good rule of thumb is to have at least 1 year's worth of expenses saved up, but you can have different emergency funds for different situations. In order to calculate how much you'll need, sit down and calculate all of your monthly expenses, and multiply it by 12. You'll then know how much you anticipate to spend annually. Obviously, it's going to take a while to build up this large amount of money, and emergencies can happen in the mean time. Keep going until your goal has been reached. Bonuses from work, windfalls of money, or any money you save should be put towards your emergency fund until it's full. You may not think you'll need it, but you'll be happy you have it if you do.
Consider having your money sit in a high yield savings account, so that you can earn money as it sits. Unfortunately, the interest rates aren't what they used to be, but some money earned is better than no money earned.
Plan for your health. As you get older, you'll notice your health may start to decline. It's time to start reevaluating your health and work on prevention as much as possible. Drop your bad habits like smoking and pick up better habits like regular exercise.
Don't let your age intimidate you; there are millions of people in their 50s who are in the best shape of their lives! It can be as simple as walking a couple miles everyday and drinking more water. You may want to incorporate a healthier diet. If you have a preexisting condition, you'll want to ensure you have adequate health insurance, doctors who take excellent care of you, stay on top of your medications, and always keep your appointments. Make this a lifestyle change; health is wealth.
Planning doesn't stop even in your 50s. You've probably heard the saying “if you fail to plan, you plan to fail”. Prepare early and be able to reap the benefits later on.
Three Things You Can Do for Your Money in Your 50’s
Now that you're in your 50s, here are three things you can do for your money:
1. Make your retirement your number one financial priority
It may not have been the first thing on your mind when it came to what you should spend your money on, but it should be now because you're closer to retirement age than ever before. In the past, you could depend on social security and a pension, but now your retirement is in your hands.
If your company has a 401(K) program, you should not only be contributing, but attempting to max it out every year until retirement. Put every single extra cent you have towards your 401(K) contributions, especially if your job is generous enough to match up to a percentage. You may have started off your account with the same amount your job is willing to match, but it's time to see if you can contribute more.
Remember, your retirement is what you'll be living off of. No more steady checks like you get from your job. You want to ensure you have enough money to continue enjoying your lifestyle comfortably. Also, if you have an IRA account, work on maxing that out annually as well. If you don't have an IRA account, I urge you to open one up today. The more money you have saved, the better.
This is also a great time to reconsider your investment strategy. When you were younger, it was easier to invest more aggressively because you had time to recoup your costs. Since you're nearing retirement age, it's best to scale back a bit, take a more conservative approach. You may have a smaller return, but they'll be more guaranteed returns.
2. Contemplate your career
You may be closer to your retirement age, but you're also not getting any younger. Life is too short to continue to work at a job you absolutely loathe. Have you always dreamed about starting your own business? Go for it! Still dreaming about your dream job? Do what you have to do to get it.
Job loyalty nowadays simply isn't worth it. If there's a better position out there for you, that's personally fulfilling, financially fulfilling, or both, you should work hard to get there. You're never too old to continue your education, so if a degree or certification is what's holding you back, go back to school. You may have had an age in mind for your retirement, and it may have been in your 50s. Consider working a few more years in order to do what you enjoy, and to work towards accomplishing your retirement goal. Who's to say you're only allowed one career in your life? If you've been waiting to change it up, this is the perfect time.
3. Focus on your net worth
It's time to focus on your net worth. You certainly don't want to be in the negative at this point in your life. Work hard on eliminating credit card debt, auto loans, and your mortgage. Get aggressive in your debt repayment strategy. The less money you have to pay out every month towards these bills, the more money you can put towards your nest egg.
You should have an emergency fund in the tens of thousands in case of an emergency, and be thinking of all the ways you can maximize your earnings and your savings. Can you find multiple ways to diversify your income? Can you find places in your budget to save money by doing things like using coupons, finding alternative methods of entertainment, or selling things you don't need? Your net worth potential is greater than ever at this age. You may not be able to do it alone. Consulting a CFP (Certified Financial Planner), accountant, and/or tax professional will be able to show you things you may have overlooked, and introduce you to strategies you never knew before.
You may have had other goals in mind, but these 3 are the best things you can do with your money at this age. What are you waiting for? Start today!