Even when it seems impossible to get a grasp on your money and financial situation when you're nearing retirement age, it is doable. "It's never too late to take control of your finances," says Melissa Houston, a Certified Public Accountant, founder of She Means Profit and author of Cash Confident: An Entrepreneur's Guide to Creating a Profitable Business. With that said, though, there are some key ways to do so—especially later in life. This also includes understanding a money mistake that people over 50 should stop making, according to Houston.Not everybody can or even wants to retire in their 60s, but that doesn't mean you can blow off financial planning. Whether you plan to keep working or not, managing your money properly remains critical for everybody—especially those nearing that magical retirement age of 67. And, if you plan to take your social security at the earliest age of 62, you have even less time to factor in how that impacts your finances.Here are the most important things for those over 50 to keep in mind about their money, including what not to do.Related: Finance Experts Are Begging You To Stop Doing These 9 Things 5 Years Before Retirement
Financial planning is important for every adult. But when you're over 50 and staring retirement in the eyes, it's even more vital."Money management in this decade isn't optional," Houston says. With retirement looming, especially in what she calls "today’s turbulent economic times," now is "the time to get intentional, strategic and focused so you can secure yourself financially," she explains.
How Much Does the Average 50-Year-Old Have in the Bank?
Houston says that, for many, "It can feel like you've fallen behind on your savings" as you begin to approach retirement age. So, how much money should you have in your bank accounts?By age 50, she recommends a savings accumulation of around five to six times your annual salary. "In reality, though, the median savings for people in their 50s is often... far below where it should be," she adds.Related: 9 Subtle Signs of ‘Stealth Wealth’ That Are Easy To Miss, According To Finance Experts
The #1 Money Mistake a Financial Strategist Is Begging People Over 50 To Stop Making
With all this talk about the importance of being strategic with your money and savings, it's no shocker that the biggest mistake you can make over 50 is not doing that."The single biggest mistake people over 50 can make is not having a clear financial plan for retirement," Houston says. "At this stage, you can't afford to drift." She stresses that it's important that you "know exactly what you have, what you'll need and how your money will get you there." She also notes that it's not too late to get this process on track in your 50s. "There's still time to catch up through strategic planning, maximizing contributions and smart investing," she shares.But, she adds that it's not necessarily enough to cut back on expenses in an effort to save more. "That's a limited approach," she says. Instead, she recommends looking at how you can also earn more, suggesting "negotiating a raise, starting a side business or finding new income streams" to give yourself flexibility and expand your savings."[That] builds real wealth far faster than cutting lattes ever will," she explains.Related: The #1 Money Concern Millennials Bring Up in Therapy, According to Therapists
While it can sometimes be good to be on the conservative side in terms of money, you shouldn't be too conservative in terms of investing if you're over 50."Many people over 50 struggle with investing because they... become too conservative and park their money in cash that can't outpace inflation," Houston says. But if you do end up investing, make sure to be smart about where you put your money."Portfolios are often poorly diversified, with too much money invested in one asset or with cash sitting idle in a low-interest savings account," she notes.
Related: 13 Smart Ways Women Over 50 Are Building Wealth, According to Financial Planners
2. Being too aggressive
On the flip side, Houston cautions against being overly aggressive with an investment strategy this close to retirement. She warns against "chasing risky returns to make up for lost time" or making "emotional decisions during market swings."
While cutting down on coffees or dinners out may not make or break your financial situation, larger purchases definitely can. Houston cautions against spending "as if retirement isn't right around the corner.""Many continue lifestyle spending on travel, cars and home upgrades without balancing it against their savings reality," she adds. "You have fewer years left to let investments grow and less flexibility to recover from financial missteps."Related: This ‘One Wrong Move’ Can Cause People Over 50 To Run Out of Money, Financial Experts Warn
4 Financial Strategies To Implement Over 50
1. Maximize contributions
"At 50, you can be eligible for 'catch-up' contributions [to retirement funds], which let you boost savings in the critical years before retirement," Houston says.
Houston says that high-interest debt—especially things like a mortgage—can get you into trouble down the road, so she recommends trying to pay it down while you're still earning an income. "[This] frees up cash flow and reduces financial stress [in retirement,]" she says.
Related: The 8 Best Side Hustles for Women Over 60, According to Career Coaches
3. Increase income
Houston says it's becoming more common for people in their 50s to start businesses, which can significantly expand their earning potential. "With the experience and knowledge you've built over a lifetime, you're well-positioned to succeed," she explains. "It not only generates income now but can also become part of your retirement plan."If you don't want to start a business, she says you can also try negotiating for higher pay, monetizing some of your other skills or finding a way to make passive income.
4. Create a spending plan
Houston says it's important to know what you'll need to accommodate your lifestyle. "Map out how your retirement withdrawals will work so you don't overspend early in retirement," she says. That way, you "can ensure your money lasts."Up Next:
Related: Finance Experts Are Begging People Over 50 To Start Doing This ASAP if They're Not Already
Source:
Melissa Houston, CPA, founder of She Means Profit and author of Cash Confident: An Entrepreneur's Guide to Creating a Profitable Business. Find her on Instagram @melissahoustoncpa.Hence then, the article about a financial strategist is begging people over 50 to stop making this money mistake was published today ( ) and is available on Parade ( Saudi Arabia ) The editorial team at PressBee has edited and verified it, and it may have been modified, fully republished, or quoted. You can read and follow the updates of this news or article from its original source.
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