Once you get through your 30s and 40s, you might think you will finally be at a point when you can relax and not watch your money closely, and this may be true depending on your financial situation. However, when you reach your 50s, your financial work really isn’t done, and you need to remain vigilant to ensure your money works for you for the rest of your life.
When you reach your 50s, you could start feeling a financial pull from not only your children but your parents, as well. Regardless of the pull from your family, it is perfectly fine to begin focusing on yourself and putting your financial future first. There are several money to-do’s that you must work at to ensure your financial stability when you hit retirement.
1. Double down on your retirement savings
Now that you are settled into your career and many of life’s largest expenses are hopefully behind you, it is time to put that money directly into your retirement savings. Increase your contributions to their maximum to really collect money into your retirement 401(k) plans.
If you feel you are behind on your retirement savings, you can take advantage of the catch-up contributions for your 401(k) and IRA that allow you to put back even more money than you normally can. If you want to save even more than you are allowed to with the extra contributions, you can consider opening a second IRA or Roth IRA to stash that extra cash away for retirement.
In addition to adding to your retirement plans, you may want to discuss dialing back the risk on your investments with your financial planner. When you do this and how much you reduce it depends largely on how much longer you plan to work and what your financial situation is at the time.
2. Pay off debt
Now that you are in your 50s, you are most likely making more money than you ever have, as the prime earning years for most Americans are between ages 50 and 65. Instead of spending that income, consider using that extra money to aggressively pay off your debt. Credit card debt and any other type of loans should be taken care of first.
Once you have paid off this debt, move onto other bills that, while they aren’t actually debt, can easily take a bite out of your retirement savings. You most likely don’t have too many years left on your mortgage if you have lived in your home for quite some time, so why not pay it off? The more debt you get rid of now, the longer your retirement savings will last you.
3. Grow your emergency fund
The same rules apply for people 50 or older as they do for everyone else. You should still try and save at least six months’ worth of income and store it in an easy-to-access location in case there is an emergency. After you turn 50, however, you may want to consider growing that emergency nest egg a little larger than the accepted six-month figure.
Assuming all of your retirement accounts are fully funded, you should try to stash away additional income to increase your emergency savings to one year’s worth of salary, and if possible, increase it even more, to two year’s worth of salary. Saving up that much for a rainy day should almost guarantee that you are ready for whatever type of financial emergency may arise, and it will keep you from having to dip into retirement savings to take care of expenses. Even if you don’t use that money for an emergency, it will still be there when you retire, giving you an automatic boost to your retirement.
Once you reach your 50s, you should be in one of the best financial positions of your life, and you need to use that position to your advantage to prepare for that day when you do retire. Work hard to eliminate any outstanding debt and get serious about your retirement so that you are adequately prepared for the day when you retired and aren’t earning a steady income.