After reaching important financial milestones in your 20s, 30s and 40s, things should calm down a bit in your 50s. If you followed good financial practices, you should have sizeable and growing retirement savings, shrinking debt and a clear path to retirement.
And if you are off of your ideal plan, be sure to put the right habits in place right away to get yourself on the right track. While you canâ€™t go back in time and change past spending and savings habits, you can start the right habits today. Start with these five personal finance habits for your 50s to get started.
Pay Off Non-Mortgage Debt
While the average debt for American households overall is on the rise, you should be working hard to fight that statistic for your own family. In your 50s, you should be saving and swelling credit card debt loads can crush those savings rates down to nothing.
Your 50s should have you pay off any remaining non-mortgage debt including credit cards, student loans, auto loans, lines-of-credit, personal loans and anything else that charges more than 0 percent and isnâ€™t attached to your primary residence.
Get On Track for Total Debt Freedom
Once your other debts are paid off, set your sights on your home and 100 percent debt freedom. Paying off your mortgage lowers your monthly income needs and increases your ability to save.
Imagine turning a $1,000 monthly mortgage payment into an additional $1,000 of monthly retirement savings. In fact, if you cut costs and have enough in savings, you may even be able to retire early.
While the FIRE (financial independence / retire early) movement is made up mostly of younger people looking to quickly hit an early retirement age, there is no reason you canâ€™t go for FIRE in your 50s.
Maximize Your Retirement Savings
Speaking of early retirement, are you on track to hit your retirement needs and goals? After factoring in Social Security and your 401(k), you are responsible for making up the gap to maintain your standard of living.
Most financial experts suggest saving at least 10 percent to 15 percent of your gross income to maintain the same standard of living in retirement. If you have not been doing that for the last few decades, you may have some catching up to do.
Lucky for you, the government planned for this and gives you extra incentive to invest in an IRA or Roth IRA at age 50+ with an optional $1,000 in additional annual â€œcatch upâ€ contributions. Similar catch-up rules apply to other retirement accounts as well. Make sure to take advantage if you have any catching up to do.
Audit Your Finances Annually
Youâ€™ve probably picked up more than a few personal finance lessons over the years. Itâ€™s important to regularly review and apply those lessons to your finances and upgrade your financial plan.
Never let your finances sit in the status quo without reviewing alternatives. You might find you have the best accounts for your needs. But you also may find opportunities for improvement. Donâ€™t sit idly in a bad checking account that charges you monthly fees, a savings account with pitiful interest rates or a brokerage that overcharges and doesnâ€™t meet your needs.
While your current bank or investment company may be comfortable, that doesnâ€™t always mean it is right for your evolving needs. You might lose out on thousands of dollars or more when you donâ€™t have the right accounts for your goals.
Review All Your Insurance Options
Just as you should never let your banks accounts sit idle without reviewing your needs, you should check in with your insurance at least once per year. Everything from homeowner or renters insurance to health insurance is worth reviewing at least once per year.
A review of your auto insurance, home insurance and health insurance may yield savings in many cases.
You may also want to look over your life insurance to make sure your family is protected in the worst-case scenario that something happens to you. If your spouse, children, parents, or anyone else relies on your income, you should protect them with life insurance.
While life insurance costs tend to go up with age, term life insurance may be more affordable than you realize. Whether you need a $250,000 policy or a $1 million policy to supplement your savings, leaving your familyâ€™s financial security to the chance you never get gravely sick or injured is too risky at any age.
Put Your Financial Future on Autopilot
Managing your money can be a lot of work, but it doesnâ€™t have to be! Thanks to direct deposit, automatic recurring transfers and financial automation apps, you can get your debt payoff, retirement savings and other financial needs can handle your money.
The most important thing is to not ignore your finances. Money problems wonâ€™t magically fix themselves. If you take control and get to know your income, spending, savings and debt payoff prospects, you can reach your financial goals including your target retirement age. It takes a little effort to keep the ball rolling.
But that effort doesnâ€™t have to feel like work. When you get into good money habits, you can handle your money needs with ease. That is what money in your 50s is all about.
Steps to Take to Retire Early
Sandwiched in: Focusing on Finances While Supporting Family