Your 20s were focused on building a career and a solid reputation. Your 30s showcased your self confidence and blooming family life. Your 40s demonstrated financial savviness and maturity. And here you are at halftime – your 50s are all about enjoying every moment, but solidly preparing yourself for the next half of your life. These 5 principles will prepare you for all of the most important financial aspects of your later years.
1. Make retirement your #1 priority
This rule should apply to everyone, but most importantly to those in their 50s. Most of us (if not all) understand the importance of saving for retirement. However, the sad truth is, a large percentage of the American population has not saved enough money to live of off post retirement. Even more alarming, many folks are near the age of retirement with no back up plan, but the mere option of working for as long as possible. In your 50s, you can start to see retirement drawing nearer on the horizon (It doesn’t seem so far away now, does it?). This is the time to maximize your retirement savings, if you haven’t done so already. Make it count, by paying yourself first. Not only will this help you allocate as much money as possible to your golden years, but it will also force you to cut back on goods and services that do not hold nearly as much value as your retirement (such as premium cable, luxury cars, travel, etc.). This also includes having the will power to say, “no” when it comes to financially helping your family. It may sound harsh, but your adult kids will be able to find other options to gain access to funds for most needs such as college, renting an apartment, purchasing a car, buying a home, etc. As a parent, you may feel an obligation to ensure your kids don’t struggle, but doing so only makes them less than self-sufficient. Remember, there aren’t any loans for retirement. Following this mindset now, will allow you to not only live more comfortably, but also take better care of yourself when the time comes.
2. Ensure you are debt-free
Approaching your 50s with debt isn’t exactly ideal for your financial well-being. By this point in your life, you shouldn’t carry balances on credit cards you can’t pay off in full each month. The interest rates will only rob you of what you could be saving for your near future (aka retirement). Consider eliminating any revolving credit debts you may have and re-evaluate your spending habits – you may be charging more than you can truly afford. Think less is more. The less money you spend now, the more you’ll have for the years to come, when you will no longer be able to work, or earn an income. No one wants to grow old and struggle. Make the sacrifice now. Pay off all your debts, so you can live free of anxiety, post retirement. If you’re not sure how long it will take you, try using this debt payoff calculator from CNN Money.
3. Reduce investment risk and seek lowisk investments
Now is the time to start assessing the risk your investments currently hold. If your portfolio includes mostly highisk investments such as stocks, consider reducing investment risk by including more moderate to lowisk investments and diversifying across different asset classes (i.e., real estate and commodities, equities, fixedincome, cash equivalents). Although, you may want to earn as much as possible during your 50s, the risk of losing a significant amount of money, may not be worth it. Contemplate hiring a certified financial planner (CFP) to help you do this correctly. Also look into lowisk alternative investment options such as purchasing prime real estate as an investment. Not interested in Landlord duties? Consider a limited partnership with an established, real estate investment company such as, Jakob Pek Fund. Passive investments in real estate, are a good way to earn more, without taking on considerable risk.
4. Consider long-term medical insurance
No one wants to think about the challenges and health complications that unfortunately come with old age, but it is essential to plan for your long-term health now, considering 70% of people turning 65 years of age will need some type of long-term care, according to longtermcare.gov. The sooner you can purchase a policy, the less expensive it will be. Not to mention the healthier you are, the higher your chances of eligibility. Remember to also look into costs such as, nursing home care, assisted living facilities, and home health aides. The average annual cost of a private assisted living facility can run you between $36,000 and $72,000 depending on where you live. Moving to another state may also be an option that facilitates these costs. Organizing this information in your 50s, will help you transition smoothly and make it easier for you and your family to encounter down the road.
5. Plan your estate
Another less than desirable topic you must consider in your 50s is estate planning. Many postpone implementing this, because they believe they still have time, or perhaps don’t want to fathom the idea just yet. Reality is, you may be doing yourself and your family a disservice by procrastinating. The sooner you can get it done, the more peace of mind you’ll have knowing things are taking care of when you’re no longer around. Unsettled assets have been known to cause both financial and emotional stress on loved ones – especially when it takes legal action to appoint people to manage your life. Planning your estate now will alleviate the burden to your family should you pass sooner than expected. When planning your estate, remember to prepare the following 3 documents: a living will, a healthcare power of an attorney, and a letter of instruction. Both the living will and the healthcare proxy go hand-inhand, as one provides healthcare instructions in the event you become incapacitated and the latter expresses who is appointed to make those decisions regarding your healthcare. The letter of instruction acts as a summary of your entire estate plan. It is meant to serve as a reference to the appointed individual carrying out your estate. Use this checklist to ensure it includes everything you need.