If you’re approaching (or have already entered) your 50s, you might be prone to some common retirement mistakes. Additionally, for many, their 50s are the last decade they have to make significant progress towards retirement, so these mistakes can be costly.
Here are some of those retirement mistakes in your 50s you should probably avoid, and some tips on what you can do instead:
Dipping into your retirement accounts
When they enter their 50s, many investors become part of the “Sandwich Generation” – meaning they’re sandwiched between caretaking burdens from both their children and aging parents.
One of the most devastating retirement mistakes in your 50s is to allow these costs to eat into your nest egg. While it’s natural to want to help your loved ones financially, you shouldn’t forgo your own financial health in the process. If you take out a 401k loan, for example, you could be subject to severe tax penalties (if you don’t make every repayment on time) and also miss out on any growth while that money is withdrawn.
Treating cash as king
As you get closer to retiring, you’re likely to feel an increased emotional reaction to volatility and market downturns. You may even consider moving your wealth into a savings account in an attempt to protect your nest egg.
Although you will probably have to make adjustments to your plan as you enter your golden years, this severe reaction is highly unlikely to be beneficial. By moving all of your wealth into a savings account, you won’t only miss out on compound interest and growth; you’ll also see your wealth shrink from inflation.
One of the biggest retirement mistakes in your 50s is to underestimate how much time your wealth still has to grow and compound. If you’re retiring at 65, for instance, that’s a decade and a half of growth you could be missing if you move your wealth into a savings account.
Not taking full advantage of your retirement accounts
If you’re age 50 and older, the IRS offers catch up contributions for certain tax-advantaged investments (like your 401k or IRA). This allows you to contribute more than the normal contribution limits for these accounts as you edge closer to retirement.
For 2017, the IRS allows for an additional $1,000 to be invested in your IRA (both traditional and Roth), and $6,000 for 401ks. You can see their page for more details.
Learn more about how to avoid retirement mistakes in your 50s
At LexION Capital, we craft bespoke retirement portfolios tailored to each client’s unique financial goals and needs. If you’d like to know how we can help you achieve a worry-free retirement, let’s have a conversation.
