The decade before retirement is especially vital for retirement preparation, however many people in their 50’s do not take advantage of this time. Taking proactive steps during this decade can have a significant payout in retirement. If you’re in you 50’s, be aware of these three mistakes that can derail your retirement plans and savings.
1. Not taking advantage of saving opportunities
After the age of 50, investors can increase the amount they contribute to certain retirement funds. If you have an IRA, you are able to contribute an additional $1,000 a year. If you’re enrolled in a 401(k) plan, you can contribute an additional $6,000. Even though your retirement may seem close, there is still potential to increase earnings through compounding interest. Taking advantage of these savings opportunities may impact the ability to change your retirement lifestyle.
2. Quitting your job too soon
If you’re considering leaving your job in your 50’s to retire early, first consider the potential implications. Prudential states, “An additional two years on the job could boost your savings by 12.7%, if your investments return 6%; working four years longer could increase your savings by 27%.” There are serious financial benefits that come with working longer. It is also more difficult for older workers to be presented with employment opportunities as opposed to younger workers. If full-time employment is not working for you anymore, consider working part-time.
3. Not planning for health care
Prudential states, “A healthy 65-year old couple retiring today can expect to pay $377,412 for medical care not covered by Medicare.” If you are relying solely on Medicare to cover your medical expenses in retirement, you may benefit from long-term care insurance or a health savings account (HSA). Both of these products can help people in retirement pay for medical expenses. Considering Medicare does not cover long-term care, long-term care insurance may be a good option for you. There are several positive features that come with HSAs, such as pre-taxed contributions. A financial advisor can help develop a retirement healthcare plan to help cover medical expenses during retirement.
Your 50’s is an exciting time in life. With retirement on the horizon, it is important to not make mistakes that can derail your life’s work. Avoiding these three common mistakes can help you be better prepared for your Golden Years.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.