Most of us rejoice when we reach the age of 50. Even after you’ve blown out the candles and said your goodbyes, you may have a headache from too much champagne, but you’ll feel the same mentally and physically.
This is the moment to examine your financial situation and ensure everything is in order. You may make severe mistakes that affect your financial stability by delaying it until later.
Austin Frye, a certified financial planner (CFP) of the Frye Financial Center in Aventura, Florida, invites potential customers to a financial review after honoring this milestone birthday. He’s blunt with individuals who haven’t done any planning or saving. Frye says you have one final chance to set yourself up for a good retirement. It’s time to speak about saving more money, spending less money, or doing both.
Some people pay attention, while others do not. The following are ten mistakes that Frye and other financial advisors see 50-year-olds make that can have major ramifications later in life.
Working past retirement age
Firstly, how much time do you have? Do you intend to work till the age of 65 or 70? Think again, says Scott Stratton, a certified financial planner at Good Life Wealth Management in Little Rock, Arkansas. According to the Employee Benefits Research Institute (EBRI), 48% of workers retire earlier than intended due to layoffs, health concerns, or family issues.
If you lose your work in your 60s, it may be difficult to find a new one, especially with the same income and benefits, says Stratton. Likewise, Andrew Houte, a certified financial planner at New Level Planning & Wealth Management in Brookfield, Wisconsin, recommends that his clients plan for early retirement. Working well into your 60s should be done because you want to, not because you have to.
Taking too much — or too little — risk.
According to Mackenzie Richards, a CFP in Providence, Rhode Island, some consumers realize that time is running out. They may take too much risk, frequently with speculative investments, or sell everything and shift into cash, CDs, or fixed annuities. The latter technique may cost them decades of progress. And the latter might result in large losses at a time when they can least afford them. He suggests finding a CFP who can assist you in developing an investment plan based on your objectives, desires, and worries. It is possible to manage your portfolio if you find a planner who will collaborate to create a plan to guide you through managing your investments. This might be a low-cost approach to receive a second perspective on your financial condition and plan an investing strategy that stops you from going overboard.
Ignoring the more than 50 catch-up provisions
Are you aware of what to do if you fall behind on saving? Fortunately, you can catch up as a 50-year-old. Individuals can contribute an additional $1,000 to an IRA in 2021, on top of the regular $6,000 maximum. Self-employed adults over 50 with a SIMPLE IRA can add $3,000 to the $13,500 maximum. With an employer-sponsored 401(k), you can contribute up to $6,500 more than the $19,500 limit. You may also create a Roth IRA while you are still working, says Rafael Rubio, a CFP with Stable Retirement Planners in Southfield, Michigan. This year’s donation is up to $7,000 for those over 50.
Having a credit card debt
Debt repayment is also important, but many individuals don’t do it aggressively enough, according to Christopher Lyman, a CFP with Allied Financial Advisors LLC in Newtown, Pennsylvania. Ideally, you should have no debt other than your home. Once your other bills are paid off, and you have enough money for retirement, you may focus on paying down your mortgage. There’s nothing like financial independence in retirement, he continues.
Taking up student loan debt
What about the children? Arthur Ebersole, a CFP with Ebersole Financial LLC in Wellesley Hills, Massachusetts, watches parents incur excessive debt to support their children’s college education because they did not save enough in 529 plans. They obtain home equity loans or incur other obligations that they may not be able to repay before retirement.
He notes that mortgages and education debts significantly reduce monthly cash flow, particularly for individuals on a limited income. Instead, have your children take out loans in their names and assist them with payments to the extent that you can or choose to. Marguerita Cheng, a mother of three and a certified financial planner with Blue Ocean Global Wealth in Gaithersburg, Maryland, agrees. Some parents are scared to discuss the correct financial match with their youngsters and school. However, you do not want to jeopardize your financial stability.
Ignoring health maintenance
Experts believe that if you haven’t formed a regular exercise routine by now, it’s not too late. Spending time, energy, and money on your health now will help you save later, according to Sarah Carlson, a CFP with Fulcrum Financial Group in Spokane, Washington. And because you feel wonderful, you’ll appreciate the adventure more.
Strong 50-year-olds may not give insurance any thought. However, purchasing long-term care coverage around the age of 60 may be challenging, according to Benjamin Offit, a CFP with Offit Advisors in Towson, Maryland. Health can deteriorate from 50 to 60, making obtaining insurance more difficult and expensive. Furthermore, while some people believe they are too old for disability insurance, their best earning years may still be ahead. According to Chen, life insurance is also vital. In the event of your untimely and early death, you don’t want your family to face emotional and financial turmoil.
Maintaining the same way of life after divorce.
Divorce. According to Stratton, it will always be the number one danger to retirement. Divided assets and separate spending might be financially disastrous. He advises his customers to analyze their financial plans as if they were single and how divorce may affect their long-term aspirations. A typical error is to cling to your previous lifestyle and budget. If you need to downsize after a divorce, do it as quickly as possible.
Failure to update critical papers
Do you have an estate plan, and is it up to date? Rubio adds that these plans assist in the distribution of assets upon your death. Should you become disabled or die, they decide who will take care of you and your estate, as well as who will look after your minor children. Daniel Flanagan, a CFP with Canby Financial Advisors in Framingham, Massachusetts, asks customers when their plan was last revised because things change. In addition, Joyce Streithorst, a certified financial planner with Frisch Financial Group in Melville, New York, encourages her clients to examine their wills, trusts, health care proxies, living wills, powers of attorney, and beneficiary designations.
Allowing the market to frighten you
Finally, do not try to time the market, cautions Joshua Hargrove, a CFP with Insight Wealth Partners LLC in Plano, Texas. You may have acquired enormous assets by this point. But you lose sleep if the market falls. Instead, he suggests filtering out the noise. People might suffer huge setbacks by making unwise judgments at the wrong moment. Maintain your plan.