6 Financial Mistakes You Should Avoid in Your 50s
If you’re in your 50s it’s probably going to be your last full working decade, so it’s important not to make any financial mistakes that could hinder your future retirement fund. Luckily, your salary right now is probably the highest it has ever been. So, you’ve still got lots of earning potential before you set out to enjoy your golden years – but that doesn’t mean you’ll spend your 50s without making mistakes. Here are 6 common financial mistakes that you should try to avoid.
1. Borrowing from Your 401(k)
The first common mistake people can make is to borrow from their 401(k) accounts if they are in need of some quick cash. Until you pay the money back you’ll miss out on any market gains even if you are still making regular contributions.
While it’s true that you can borrow from your 401(k) account for reasons like buying a house, refinancing your credit card, or your child’s college tuition, it’s still a bad move. It’s all about compound interest which is important for helping you to reach your retirement goals. But, if you borrow from your 401(k), you’re going to be paying interest, instead of earning it.
Instead of taking from your 401(k), use money from a different savings account or apply for a traditional bank loan.
2. Saving for Retirement Like a Cash-Strapped 20-Year Old
A recent study by Investopedia told that the average person in their fifties has just $117,000 in their retirement accounts. While this might seem like a large number, your contributions will work out at just $310 every month.
But, by having a sensible investment portfolio you can build this number. Shift to a balanced portfolio that holds more volume of stocks to reduce the chance of losses in your later years. Additionally, once you’ve turned 50 you can begin to make catch-up contributions to your 401(k) and IRA retirement plans.
The contribution amounts for 2017 are an extra $6,000 added to your 401(k) and an extra $1,000 for your IRAs. The more money you put into these accounts, the more interest you can make. For maximum results, try to max out your catch-up contributions.
