Lisa O
When you hit your 50s, retirement is suddenly not that far off—it’s closer than when you first started working. It’s time to get serious about planning for it. This decade is also when you’re likely to earn the most money. With the kids grown up and hopefully moved out, you probably have more extra cash. Today, we’re diving into ten common money mistakes people make in their 50s.
Thinking It’s Too Late to Start Planning and Saving
It’s never too late to start getting your finances in order for retirement. You don’t have to give up everything to save—every little bit helps, especially with compounding interest working in your favor. Kick things off with a written plan, set some realistic savings goals, and create a budget to see where your money is going.
Ignoring Retirement Plan Benefits
With your income likely higher and the kids possibly out of college, you might finally have some extra cash. At age 50 or older, you can take advantage of “catch-up contributions,” letting you put up to $26,000 into your employer-sponsored retirement account—$6,500 more than you could before. If your budget allows, it’s a smart move to contribute the maximum amount to your retirement plan.
Investing More in Your Kids Than in Yourself
We all want the best for our kids, and helping them graduate college debt-free is a great goal. But if you put their education ahead of your own retirement savings, you might find it difficult to make up for the shortfall later. Not having enough for retirement could mean adjusting your plans, like delaying your retirement age or changing your lifestyle.
Forgetting About the Costs of Supporting Adult Kids or Aging Parents
As part of the “sandwich” generation, you might be juggling the needs of both adult children and aging parents. This can cut into your ability to save for retirement or even force you to take money out of your retirement accounts early. It’s a tough spot to be in and can really impact your financial plan. Have a chat with your parents about their financial situation and what might happen if they need long-term care.
Pulling Money Out of Retirement Accounts Too Soon
Retirement accounts are meant to help you later in life, so try to avoid withdrawing money before you turn 59½. Doing so can hit you with a 10% penalty plus income tax on the amount you take out. For instance, if you’re in the 22% tax bracket and withdraw $10,000 early, you’d end up paying $3,200 in taxes and penalties. Look for other ways to finance your needs instead.
Playing It Too Safe with Your Investments
Retirement might be just around the corner, but it’s not the end of the line. You’ve still got 25-30 years ahead, and you might want to splurge on travel. To keep up with inflation, you need to invest some of your cash in stocks and other growth options. If you play it too safe—your savings might not go as far in the future. On the flip side, being too daring could put your money at risk.
Confusing Good Debt with Bad Debt
You’re probably earning more now than you did in the past. If you’ve got some extra cash, it’s tempting to use it to pay off debt like credit cards. But if you put all that extra money into paying down your mortgage instead of saving for retirement—you might miss out on hitting your long-term goals. Plus, you could find yourself needing to borrow against your home later and have trouble getting the cash you need.
Not Planning for Future Health Care
Health and long-term care costs can be a huge financial risk. Over half of Americans over 65 will need some long-term care, which can be super pricey. This type of care isn’t covered by standard health insurance and includes things like help with daily activities, whether at home or a memory care center. It’s a good idea to start thinking about getting a private policy in your mid to late 50s.
Not Updating Your Life Insurance Policies
You should check your life insurance policies every five years or whenever something big changes in your life. Common issues include term policies bought early on that are about to expire, even though you still need the coverage. Your financial needs might have changed since you first got the policy, so you might need to buy more coverage or cut back if you don’t need as much anymore.
Not Updating Your Estate Plan to Match Your Current Wishes
If you haven’t set up an estate plan yet, including a Will, Advance Medical Directive, and Power of Attorney, it’s time to get on that. If you already have these documents, make sure to review them every three years to ensure they still match what you want. Things may have changed since you last updated them—like the value of your estate, who you want in charge, or who should be guardians for your kids.