Reaching 50 years is a milestone that most of us celebrate. Still, after you blow out the candles and say goodbye to the guests, you may have a headache from too much champagne, but otherwise you feel the same as before.
Wake up! This is the time to re-evaluate and check if it is yours financial plan is fine. If you push it off until later, you could make serious mistakes that will jeopardize your future financial security.
After acknowledging this important birthday, Austin Frye, a Certified Financial Planner (CFP) at the Frye Financial Center in Aventura, Florida, is inviting prospective clients for a financial audit. With those who have invested little in a budget or savings, he is direct. “You have one last chance to take a successful retirement course,” Frye tells them. “It’s time to talk about saving more, spending less, or both.”
Some listen, but others do not. Here are 10 mistakes Frye and other financial planners make for 50-year-olds that could indeed have serious consequences.
1. He is expected to work after the retirement age
First, how much time do you really have? Do you plan to work until the age of 65 or 70? Think again, says Scott Stratton, CFP of Good Life Wealth Management in Little Rock, Arkansas. Data from the Institute for Employee Benefit Research (EBRI) show that 48 percent of people withdraw before it is planned, often due to dismissal, health problems or family issues. “You lose your job in the 1960s and it may be incredibly difficult to find a new one, especially with the same salaries and allowances,” warns Stratton. Likewise, Andrew Houte, CFP in Planning and Wealth Management at a New Level in Brookfield, Wisconsin, advises his clients to plan an earlier retirement date. “If you’re doing well in the ’60s, it should be because you want it, not because you have to.”
2. Take too much risk – or too little
At this point, some people realize that time is running out, says Mackenzie Richards, CFP in Providence, Rhode Island. “They can do one of two things: risk too much, often with speculative investments, or sell everything and go for cash, CDs or fixed annuities. The latter strategy could deprive them of decades of growth. “And the former could result in large losses when they can least be afforded. It recommends finding a CFP that can help you create an investment strategy based on your goals, aspirations and worries. If you prefer to control your own portfolio, look for a planner who will work with you to create that plan while you manage your investments. “This can be a cost-effective way to get a second opinion on your financial situation and prepare an investment strategy that prevents you from going to extremes.”
3. Ignoring 50+ compensation provisions
What if you fall behind in savings? Fortunately, as a 50-year-old, you can catch up. For 2021, the IRS allows individuals to add an additional $ 1,000 to the IRA in addition to the standard limit of $ 6,000. Self-employed people over the age of 50 with a SIMPLE IRA can add $ 3,000 to the $ 13,500 limit. If you have an employer-sponsored 401 (k), you can maximize your contributions by adding $ 6,500 over the $ 19,500 limit. “And while you’re still well-employed, you can start a Roth IRA,” adds Rafael Rubio, CFP of Stable Retirement Planners in Southfield, Michigan. “The contribution for this year is up to $ 7,000 for those over 50 years.”
4. Carrying credit card debt
Debt payment is also necessary, although many do not do it aggressively enough, says Christopher Lyman, CFP at Allied Financial Advisors LLC in Newtown, Pennsylvania. Ideally, you should work on having no debt other than a mortgage. Once other debts are paid off and you finance your pension, focus on repaying the mortgage. “There is nothing like retired financial independence,” he adds.
5. Debt collection at the faculty
What about the children? Arthur Ebersole, CFP at Ebersole Financial LLC, in Wellesley Hills, Massachusetts, see parents are over-indebted to fund their children’s college because they didn’t save enough in their 529 plans. They take out loans for capital or other debts that they may not be able to repay before retirement. “Mortgages and loans for colleges significantly complicate the monthly cash flow, especially for those who have a fixed budget,” he says. “Instead, have your children take loans in their names and help them pay off as much as you can or want to.” Marguerita Cheng, a mother of three and a CFP at Blue Ocean Global Wealth in Gaithersburg, Maryland, agrees. “Some parents are afraid to talk to their student and school about the real financial situation. But you don’t want to jeopardize your own financial security. ”