We have a multitude of clients who are approaching or who have just turned 50, and many of them all have the same questions. When will they be able to retire? How should they handle transitioning their kids to college? Are they making the right financial moves? This month, we are breaking down five money moves you should make when you turn 50.
Increase 401K contributions: Turning 50 means you can save more into your 401K. In 2019, anyone 50 or older can contribute an extra $6,000 to their 401K, for a total employee contribution of $25,000. This is a wonderful provision in the tax code that will allow you to defer more taxes and save more as you are nearing retirement.
Analyze your mortgage: Whether your kids are nearing college age or are still in elementary school, start thinking about your housing situation over the long term. Are you wanting to be in a good school district, or are you thinking about selling your home and moving to the beach? Start thinking about how long you will be earning the income you are earning now. If you take a 30-year mortgage today, ask yourself how you will pay that off when you are no longer making the same income you are making today.
Kids on payroll: Do not underestimate the emotional pull of helping your kids. Have a realistic conversation about what you can and will help with. How long will you pay for their mobile phone? Auto insurance? Health insurance? These questions are especially helpful to determine your annual burn rate in retirement.
Consolidate: It’s time to start looking at the “stuff” you’ve accumulated over the past 30 years of your adult life and ask yourself what you really need. You can give away or sell some of your old things that you’ve been holding onto for way too long. It’s also common for adults to open many lines of credit, checking accounts and savings accounts. Assess your financial house and ask yourself if you should consolidate any of these accounts to make your overall financial life a little more simple.
Review your insurance: Especially long-term care insurance. The older you get, the more expensive the insurance will be, and with people living longer in retirement, it’s smart to assess how much insurance you should need if you ever need full-time care.
Allison Nye, Wealth plan design specialist at oXYGen Financial. Co-host of “They Don’t Teach You This” podcast. Connect with her at firstname.lastname@example.org.