In a youth-oriented culture, it is easy to feel a little over the hill by the time you turn 50. When it comes to building wealth though, your 50s are the prime of your life – a period when you have a chance to emerge from debt, enjoy your peak earning years and start to see your investments make a serious contribution to your net worth.
To take advantage of this crucial phase of your financial life, it is important to understand some key factors that can help you make the most of your 50s.
Personal finance checklist at age 50
As you look over your financial situation once you turn 50, here are some things you should attend to:
1. Shift more heavily from borrowing to saving
Early in your career, accumulated savings are likely to be modest and it seems you are taking out one loan after another: student loans, car loans, home mortgages, etc. By the time you reach age 50 though, you should have greatly reduced your debt burden. In its place, you should see a growing portfolio of retirement assets. This is the type of trend that can feed on itself: the more you retire your debt, the more of your monthly budget can go to savings rather than loan payments.
2. Estimate your Social Security benefits
The U.S. Social Security Administration will provide you with a free projection of your retirement benefits based on your career earnings so far. While this will remain subject to change based on your subsequent earnings, by age 50 you should have enough of a track record to get a sense of what contribution Social Security will make to your retirement income. This projection can also help you start to think seriously about the pros and cons of retiring early or working longer to achieve the maximum annual benefit.
3. Reassess your retirement goals
In addition to Social Security, look at your other retirement savings and see how much income they project to provide. Knowing where you stand will help you make more concrete plans about the future, including when to retire and what kind of lifestyle to expect.
4. Use catch-up retirement saving opportunities
Looking at your projected Social Security benefits and your savings accounts relative to your goals may tell you that you have some catching up to do. Fortunately, the government gives you some catch-up opportunities in the form off additional tax-deferred retirement contributions to 401(k) or individual retirement account (IRA) plans that you can make once you turn 50. Use this as an incentive to start making extra contributions.
5. Keep your asset allocation aggressive
People often feel their investments should get more conservative as they get older, but age 50 is too soon to throttle back to a less growth-oriented asset allocation. At that age, you are probably still more than a decade away from retirement, and still have an investment time horizon of some 30 or so years stretched out ahead of you. Plus, if you are contributing heavily to your retirement plans, this positive cash flow will help smooth out some of the volatility from growth investments.
6. Update your will
If you first made a will when you started your family, you might find things are radically different by the time you turn 50. Your kids may be on the verge of adulthood and your net worth may be substantially greater, so it is a good time to take a fresh look at what provisions you’ve made for your survivors.
7. Don’t be shy about discounts
Turning 50 makes you eligible for AARP membership. Don’t let that make you feel old – just look at the discounts available, and think of it as an advantage you’ve earned.
8. Take advantage of senior checking accounts
Some banks offer checking accounts for older customers that have no monthly fees. Eligibility is often set at age 50, and with free checking getting harder to find these days, signing up for one of these accounts can be another advantage of getting older.
9. Survey your career opportunities
Since these can be your peak earnings years, you should assess whether your current employer is the best place to capitalize on those years, or whether you could do better somewhere else. To think more defensively, you should also take an honest look at whether your job skills need freshening up so your employer does not view you as out of date.
With proper attention to your finances, this could be your greatest decade for wealth building. After all, it is too late for procrastination and too early for slowing down. This is prime time.
Source by:- huffingtonpostShare: