In addition to saving for their looming retirement, people in their 50s are often juggling a number of financial responsibilities, from paying their children’s tuition to caring for elderly parents.
At this age, you may feel like your life, retirement savings, and finances are set in stone. But this way of thinking can be one of the biggest financial mistakes people in their 50s make, says Autumn Knutson, a certified financial planner and founder of Styled Wealth.
“There’s still plenty of time, if not more, in your 50s to make changes for the life you want now, the life you want in the future, and into your 60s and 70s,” she says.
Here are three smart money decisions for your 50s, made by three certified financial planners.
Andrew Fincher, CFP and financial advisor at VLP Financial Advisors, says that people in their 50s, who are inching closer to retirement, are a good time to consider long-term care insurance.
Separate from health insurance and Medicare, long-term care insurance covers costs that often occur in later life, such as assisted living and home care.
Long-term care insurance can help you cope with the rising costs of long-term care. The median price for a private room in an assisted living facility is $64,200 per yearaccording to Genworth 2023 Medical Expenditure Survey. If you get insurance now, you won’t have to pay high premiums later.
“When you reach your 60s, [insurance companies] Fincher said: “If you actually raise your premiums, it can be very expensive. Once you’re in your 50s, you have a little more flexibility to cover cognitive impairment. Having that covered is a good idea. , which can be very helpful in preventing you from hurting your spouse or children.”
As you approach retirement, try to increase your 401(k) contributions as much as possible, says Margherita Chen, certified financial planner, CEO of Blue Ocean Global, and member of CNBC’s Board of Advisors. says.
“If you haven’t maxed out yet, increase your 401(k) contributions by 1% every January,” she says.
According to the magazine, a 55-year-old with an annual income of $80,000 could have an additional $16,779 in retirement savings at age 67 by increasing contributions by 1%. Calculated by Fidelity Investments. This assumes that his investment growth rate is 5.5%, his employment is stable, and his salary growth rate is 4% per year.
“Don’t cling to the past in the present.” [when] “Once you understand these strategies, see if you can put one of them into action,” says Cheng.
Joe Conroy, a certified financial planner and author of “Decades & Decisions: Financial Planning At Any Age,” started putting money aside in non-retirement investment accounts in his 50s, either with his spouse or on his own. Let’s say.
A smart way to spend your money is to diversify your investment accounts by adding money to a taxable brokerage account rather than keeping all your cash in a tax-advantaged individual retirement account, Conroy says. . That’s because every dollar you take out of your IRA is taxed as regular income in retirement, while earnings in your brokerage account are taxed at lower capital gains rates.
“The goal is not to retire with all your money in an IRA,” Conroy says. “Your 50s are the perfect time to start adding money to non-retirement accounts…there’s still time to make money, and you’ve got time to actually cash flow and put money in, so leave it alone.” It will continue to grow, so you can save up in anticipation of retirement.”
Want to make extra money outside of your day job? Apply CNBC’s new online course “How to make passive income online” Learn about common passive income sources, tips to get started, and real success stories. Register now and get 50% off using discount code EARLYBIRD.
plus, Sign up for the CNBC Make It newsletter Get tips and tricks to succeed in work, money, and life.
