In their 50s, individuals are often balancing various financial responsibilities such as children’s tuition and elderly parent care, while also saving for retirement. Autumn Knutson, a certified financial planner, emphasizes that this age is not too late to make necessary financial changes. Three certified financial planners offer smart decisions for managing money in your 50s, including securing long-term care insurance, increasing 401(k) contributions, and diversifying tax buckets.
Long-term care insurance is essential to consider in your 50s, as it covers expenses like assisted living and at-home care that may arise in later years. Andrew Fincher, a financial advisor, explains that buying coverage in your 50s can help you avoid high premiums later on. Increasing contributions to your 401(k) in your 50s can significantly boost your retirement savings. Marguerita Cheng suggests raising contributions by 1% every year, which could result in substantial growth by retirement age.
Diversifying your tax buckets by investing in a non-retirement account is a smart move in your 50s, according to Joe Conroy. By adding money to a taxable brokerage account alongside retirement accounts, you can minimize taxes in retirement. Conroy advises against relying solely on IRAs for retirement income, as withdrawals are taxed as ordinary income. Having a mix of retirement and non-retirement accounts can provide flexibility and tax efficiency in retirement.
Incorporating these financial strategies in your 50s can have a significant impact on your retirement savings and overall financial well-being. By securing long-term care insurance, increasing 401(k) contributions, and diversifying tax buckets, you can better prepare for the future. It’s crucial to be proactive in managing your finances at this age, as there is still ample time to make adjustments that will benefit you in your 60s and 70s.
The median cost of care in assisted living facilities is substantial, making long-term care insurance an essential consideration for individuals in their 50s. By purchasing coverage early, you can protect yourself from rising care costs and potentially avoid high premiums later on. Increasing contributions to your retirement accounts, such as a 401(k), can significantly grow your savings over time, providing greater financial security in retirement.
Diversifying your investment accounts by adding money to a taxable brokerage account is a key strategy for managing taxes in retirement. By spreading your assets across different tax buckets, you can minimize tax liabilities and enhance flexibility in retirement. Taking these steps in your 50s can set you on the right path towards a more secure financial future, ensuring that you are well-prepared for the years ahead.
