Money in your 50s: Time to reduce risk and kick that savings strategy into high gear
This article was originally published April 27, 2017.
Once you get to your 50s the hope is you will be close to paying off your mortgage and you will no longer be saving for your kids' education. It's probably the first time in 25 years you can take a sigh of relief when it comes to your finances! Not to burst your bubble, but as your financial focus moves to retirement, there are still important things to consider. Your 50s are an ideal time to get your financial situation on track if you haven't already. Since you are making more, and hopefully less in debt than ever before, you have some discretionary income to enjoy, and, still invest. Hopefully you have been contributing to retirement funds for decades, but don't panic if you haven't, just start. You still have time to save enough for your retirement years.
Update your vital information
You may have a will, you may not. You have may have life insurance, you may not. Whatever your situation is, it's time to revisit all the vital protections you have put in place. Make sure your will reflects your current situation, and that you have an executor whom you still trust. If you had a will drawn-up 15 years ago, the confidence in the people you had then may not be the same today. As well, it may be more appropriate to appoint one of your children as an executor at this point. Take a look at your life insurance if your children are no longer dependent on you, as you may not need as much coverage. Also, call around to your automobile and home insurance companies, if you have a clean track record it might be time to ask for a discount on your premiums. Some auto insurance companies have special rates for those over 50 with good a driving record.
Know your net worth
It's important to know exactly how much money you really have. There is still enough time to make adjustments to your spending and savings if you're not on track. Calculate all your debts, mortgage, credit card, line of credit, bank loan, and advances from a friend. Whatever you owe, write it down. Then calculate what you own, your home value minus your mortgage, your retirement savings, other savings, any other assets you have. Subtract your debts from your assets to get your net worth. If you want to increase, it start by tackling your debts immediately and then get serious about saving more.
Shift your investments
You're less than 15 years away from retirement age. It's important to make sure all that money you have been investing your whole life is working for you. Start to move your more risky investments into to safer fixed income products, you don't have to do this all at once, but as you get closer to 65 you should have enough money in a safe investment to help you financially through the first five years of retirement.
Start to consider downsizing
It might not be time yet, but in the next decade you should start to consider downsizing. This can be for a variety of reasons, but one of the major ones is to save money. First, the sale of a bigger family home will free up some equity, even after you buy your new home. Also a smaller home, means less to cool, less to heat and less to light. It also cuts down on time eaten up by cleaning and maintaining your large home. Once you start thinking about it, start looking — if not for homes right away, at least the area you want to live in.
Save even more
Sounds crazy, but now that your major financial obligations are behind you (or almost behind you) it's time to put more money away. (Remember, it's still all for you!) With no mortgage payment (hopefully?), no more saving for your kids' education, try to move that extra money into your retirement savings plan. Think of it this way: you have been saving your whole career for the necessities you will require during retirement (food, shelter and clothing); now put money away for all the fun you plan to have in retirement. Save this money in a high interest savings account or a fixed income product, something safe, and use it to fund a great annual holiday over your retirement, or buying that convertible car you always had your eye on.