You may think people in their 50’s have it all together and don’t make any financial mistakes (I like to hope that anyway, right?), but turns out there are still some decisions that are best not made.
Here are some things NOT to do in your 50’s:
1.) Overpay on your mortgage.
Lots of people in their 50’s want the burden of paying for a mortgage in retirement off their back, so they up their payments on it. In fact, if you were to contribute an extra 500 dollars a month to pay down your mortgage for the last 10-15 years before retirement, you would actually make quite a bit more if you invested that same amount of money in your retirement account, allowing you to still pay off your mortgage on time and have extra money to spare. Only pay down your mortgage early if you’re maxing out all your retirement savings plans.
2.) Lose your ability to take risks.
While someone in their 50’s should not have a portfolio balanced the same as someone in their 20’s, there still needs to be a fair-sized section aimed at high growth, which is usually riskier than the investments with smaller returns. However, inflation, paired with how long people are living these days, points to the need for 50 year olds to consider how much risk they need to take to keep their portfolio paying out for another 30-35 years.
3.) Take out a new mortgage or refinance the existing one.
Do the math here – do you want to be paying that off until you’re 85? Look at other options to get the money you need.
4.) Buy more stuff.
Your 50’s are probably going to be some of the highest paid years of your career. Don’t let your lifestyle inflate along with each pay raise. It’s a lot harder to scale back once you get used to a certain style of living.
5.) Start investing in individual stocks.
Individual stocks are far more volatile than other funds and require a bit of education before you start investing in them. If you have not been investing in individual stocks all along, now is not the time to start.
6.) Ignore the awesome “catch up” loop holes allowed in your 401(k) and IRA contributions.
If you’re behind on your retirement planning, you can make bigger contributions to your IRA and 401(k)
7.) Stop thinking creatively about income.
Now may be the time to consider investing in different things like rental properties to help fund your retirement.
8.) Don’t double check all your insurance needs.
You may need much less life insurance at this point. You should also be sure to buy long term care insurance before you turn 60, when rates begin to skyrocket.
Also, be sure to check out my raffle, ending on September 30th, for a copy of Dave Chilton’s The Wealthy Barber. It’s full of excellent financial advice!