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10 Retirement Planning Mistakes people make at 50

10 Retirement Planning Mistakes people make at 50

April 18, 2024

Reaching age 50 is a milestone that most of us celebrate. Still, after you’ve blown out the candles and bid farewell to your guests, you may have a headache from too much champagne, but otherwise feel the same as before.

Wake up! This is the time to reassess and make sure that your financial plan is in order. If you push it off until later, you may make serious mistakes that will jeopardize your future financial security.

After acknowledging this momentous birthday, those who have done little budgeting or saving, you have one last chance to put yourself on course to achieve a successful retirement. It’s time to talk about saving more, spending less or both. 

Some folks will listen, but others will not. Following are 10 errors that we see 50-year-olds make that may, indeed, have serious consequences down the road.

1.  Expecting To Work Past Retirement Age

First, how much time do you really have? Are you planning to work until age 65 or 70? Think again, data from the Employee Benefits Research Institute (EBRI) show that 48 percent of people retire sooner than planned, often due to layoffs, health issues or family matters.  Lose your job in your 60s, and it may be incredibly difficult to find a new one, especially with the same pay and benefits. If you work well into your 60s, it should be because you want to, and not because you have to.

2.  Taking Too Much Risk — Or Too Little

At this point, some people realize that time is running out, and they may do one of two things: take too much risk, often with speculative investments, or sell everything and move into cash, CDs or fixed annuities. The latter strategy could deprive you of decades of growth. And the former could result in big losses when you can least afford them. Find a Fiduciary who can help you create an investment strategy based on your goals, aspirations and concerns. 

3.  Ignoring The 50-Plus Catch-Up Provisions

What if you are behind in your saving? Fortunately, as a 50-year-old, you can catch up. For 2021, the IRS is allowing individuals to contribute an additional $1,000 to an IRA on top of the standard $6,000 limit. Self-employed people 50 and older with a SIMPLE IRA can add $3,000 to the $13,500 limit. If you have an employer-sponsored 401(k) you can max out your contributions by adding $6,500 over the $19,500 limit. And while you are still gainfully employed, you can start a Roth IRA. The contribution for this year is up to $7,000 for those 50-plus. 

4. Carrying Credit Card Debt

Paying down debt is also essential, though many people don’t do it aggressively enough. Ideally, you should work toward having no debt except your mortgage. Once other debts are paid off, and you are funding your retirement, then focus on paying down your mortgage. There is nothing like being financially independent in retirement.

5. Taking On College Debt

What about the kids? Many times we see parents take on too much debt to fund their children’s college because they did not save enough in their 529 plans. They take out home equity loans or other debts that they may be unable to pay off before retirement. Mortgages and college loans put a significant drag on monthly cash flow, especially for those on a fixed budget. Some parents are afraid to have the conversation with their student and school about the right financial fit. We understand you want to help your children, but you don’t want to compromise your own financial security.

6. Overlooking Health Maintenance

If you have not established a regular exercise habit, it's not too late. Investing time, energy and money into your health now will help to reduce health-related expenses later. And you will enjoy your retirement journey more because you feel good!

7. Leaving Out Insurance

Robust 50-year-olds may not think much about insurance. But at 60, buying a long-term care policy may prove difficult. Health can worsen from 50 to 60, making a policy harder and more expensive to obtain. And, while people may assume they are too old for disability insurance, their peak earning years may still be ahead. If you were to lose your income, or have a significant reduction, would it cripple your retirement plan?  Life insurance is also important, You don’t want loved ones to experience emotional and financial stress in the event of your untimely and premature death. 

8. Living The Same Lifestyle Post-Divorce

Divorce. It will always be the number one risk to retirement. Dividing assets and assuming individual expenses can be financially devastating. Envision your financial plan as a single person and consider how divorce will affect your long-term goals. Holding on to your past lifestyle and budget is a common mistake. If you need to downsize post-divorce, do it sooner rather than later.

9. Failing To Update Important Documents

Do you have an estate plan, and is it current? These plans help divide assets upon your death. They determine who takes care of you and your estate should you become incapacitated or deceased, and who will care for your minor children.  Because things change. Review your wills, trusts, health care proxies, living wills, powers of attorney and beneficiary designations.

10. Letting The Market Spook You

Finally, do not make the mistake of trying to time the market. By now, you may have amassed substantial assets. But whenever the market plunges, you lose sleep. Instead, filter out the noise. People can suffer massive setbacks by making bad decisions at just the wrong time. Stick with your strategy!