5 Retirement Planning Slip-Ups to Avoid In Your 50s
It's best to have a solid grip on your retirement planning strategy by the time you reach your 50s. If you've been saving steadily throughout your 30s and 40s, the next decade or so will hopefully be a cakewalk. But you can't afford to leave room for error.
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It's best to have a solid grip on your retirement planning strategy by the time you reach your 50s. If you've been saving steadily throughout your 30s and 40s, the next decade or so will hopefully be a cakewalk. But you can't afford to leave room for error. As you get closer to retirement age, it's important to make sure you're avoiding these potentially costly mistakes.
With your 60s on the horizon, it's a good idea to throw as much as you can into your retirement accounts. If you're not maxing out your employer's plan or funneling extra cash into an IRA, you're shortchanging your nest egg without even realizing it.
Aside from the annual contribution limit, you get an extra break when you turn 50. At that point, you can make catch-up contributions to these plans for even more savings. As of 2016, the catch-up contribution limit for employer-sponsored plans is $6,000 on top of the $18,000 regular limit. For IRAs, you can chip in $5,500 plus an extra $1,000 in catch-up contributions.
2. Not Safeguarding Your Nest Egg
Saving a huge pile of cash for retirement won't do you any good if you end up having to spend the money on something else. If you develop serious health problems, for example, that money might go toward covering your medical costs instead. In the worst case scenario, you'd have to spend down your assets to qualify for Medicaid if you require long-term nursing home care.
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Even if you stay healthy, there's always the possibility that you could pass away unexpectedly. That would leave your spouse or children in the position of having to use your retirement funds to pay for burial expenses or clear any debts you owe.
Investing in long-term care insurance or a life insurance policy may cost you a little bit of money each month. But it can be worth it if it keeps your assets intact for your heirs. Buying these policies in your 50s versus your 60s can make a huge difference in the size of your premiums. The longer you wait, the more you'll pay.
3. Taking Too Much of a Gamble With Your Portfolio
Investing well over the long-term is one of the keys to building wealth and as you get older, your ability to tolerate risk begins to shrink. If you're in your 50s and you're still heavily invested in individual stocks, now's the time to start shifting
towards more conservative assets, such as bonds. Unless you're planning to push your retirement date into your 70s, a stock-heavy portfolio simply wouldn't have enough time to recover if the market were to experience a slump. Having too much built-in risk is one of the most dangerous retirement planning slip-ups.
4. Letting Debt Linger
Ideally, you will have knocked out most of your debt in your 40s. But if you're still plagued by car loans or credit cards, it's best to make getting rid of those obligations a top priority. Streamlining your expenses now can give you a more realistic idea of what you'll need to live on once you do retire, and it can free up extra cash that you can save.
5. Paying Too Much in Investment Fees
While you're working on getting rid of your riskier investments, it's a good idea to take a look at the fees you're paying. If you're shelling out hundreds of dollars a year to maintain a particular holding that's not delivering the greatest returns, you might want to consider investing your money somewhere else. Ditching actively managed funds and opting for cheaper investments like ETFs can leave you with more money to put into your retirement accounts.
While all of these retirement planning slip-ups can have serious repercussions, the worst retirement move you can make in your 50s is not saving anything at all. Even
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