It's never too late to start building financial strategies. Here's how to build wealth in your 50s for long-term goals.
It’s never too late to start building wealth for you and your loved ones. Yes, the earlier you start creating wealth, the better position you will be in later life. But it you’ve just turned 50 or are closer to turning 60, there are still plenty of steps you can take to maximize your personal wealth.
As your retirement timeline shortens, how you save and invest during this decade will affect the rest of your life. Here are six ways to build wealth in your 50s and give yourself peace of mind as you near retirement.
Plan Retirement Income and Expenses
First, you need to get a clear picture of how much money you've saved—and what will affect your income and expenses as you edge towards your hard-earned retirement. As you age, health and wellbeing expenses will inevitably go up. This means some of your retirement income will go towards doctor visits, prescriptions, and other medical expenses. But don’t forget: these days we’re all living longer and are far healthier than previous generations. So it's important to plan for a long retirement to avoid outliving your retirement funds.
It's important to pay more attention to your expenses. Now is the time to become obsessed with growing your savings however you can. Take stock of weekly expenses and see where you can trim costs. Perhaps you can save by switching to a more affordable grocery store or vowing to cook more meals at home, rather than spending on restaurants or takeout.
Stamp Out Remaining Debts
Next, try clearing the last of your debts. Think of this as a shield against unexpected medical expenses, inflation, or other economic surprises. For example, many credit cards charge high interest rates. That’s a good place to start. You could make a plan to pay off a high interest card, and then move on to the next one after it's cleared. Once they're all paid off, you could funnel the amount of your card repayment into a high-interest savings account.
Top Up Pension Accounts
By your 50s, you have a long-track record of employment or income behind you. When you were younger, you worked hard to build up your pensions, perhaps without realizing its importance. Now it’s time to flip the script and make your pension do more of the heavy lifting through compound interest. Use the "catch-up" rule to make the maximum allowable contributions into your 401k. Or, once you've reached 50 years old, you can make an extra $1000 contribution to your IRA, which can be a real boost to your nest egg.
Make Sensible Investments
And then there are stocks, which are a useful way to build long-term wealth in many markets around the world. If you’re new to stocks, do as much research as you possibly can before making any investments. Look up the fine print, and don’t be afraid to ask for help and advice from accredited financial advisers.
If you’re already comfortable investing, consider reviewing your investment portfolio to ensure it's supporting your long-term goals. Your risk tolerance may have changed since you first started investing. For example, many experts see equities as crucial to a sound portfolio, but you may want to consider withdrawing some funds from higher risk equities to invest more in stable stocks.
Consider real estate investing too. You could add a well-selected set of real estate investment trusts (REITs) to your investment portfolio. Or, you could make a direct investment in real estate, either for an increase in property value (capital gains) or to receive regular rental deposits from tenants (income). You may also be able to use some of the money in your IRA or 401(k) for real estate investing. Note that doing so may require a deeper level real estate experience and some careful tax planning.
6 Ways to Building Wealth in Your 50s
Speaking of taxes, remember you will have to pay them on any withdrawals you make from your IRA or 401(k) plan. You will also still need to pay taxes on any income outside your retirement plans, and you might pay taxes on social security benefits. With public debt increasing around the world in the wake of the pandemic, taxes are bound to increase. Keep this in mind when planning your retirement.
And don’t forget about life insurance. The dividends and returns paid into your policy grow tax-deferred. If they're structured properly, they can supplement your income in retirement in a tax-free manner.
6 Ways to Building Wealth in Your 50s
If retirement planning starts to get too complicated to manage alone, remember that wealth experts and financial planners can help you implement financial strategies that help you build wealth and reduce long-term risks. These strategies are often customized to meet your particular needs and financial situation. They can also help with:
- Tax and debt management
- Investment and financial planning
- Health and long-term care planning.
Bear in mind that fees for financial planners are dependent on whether you have agreed to a commission-based, fee based, or fee-only arrangement. Fees will also vary from one expert to another, depending on how they structure their services—so be sure to explore as many options as you can before finding a financial planner that's right for you.