In a youth-oriented culture, it is easy to feel a little over the hill by the time you turn 50. When it comes to building wealth though, your 50s are the prime of your life – a period when you have a chance to emerge from debt, enjoy your peak earning years and start to see your investments make a serious contribution to your net worth.
To take advantage of this crucial phase of your financial life, it is important to understand some key factors that can help you make the most of your 50s.
Personal finance checklist at age 50
As you look over your financial situation once you turn 50, here are some things you should attend to:
1. Shift more heavily from borrowing to saving
Early in your career, accumulated savings are likely to be modest and it seems you are taking out one loan after another: student loans, car loans, home mortgages, etc. By the time you reach age 50 though, you should have greatly reduced your debt burden. In its place, you should see a growing portfolio of retirement assets. This is the type of trend that can feed on itself: the more you retire your debt, the more of your monthly budget can go to savings rather than loan payments.
2. Estimate your Social Security benefits
The U.S. Social Security Administration will provide you with a free projection of your retirement benefits based on your career earnings so far. While this will remain subject to change based on your subsequent earnings, by age 50 you should have enough of a track record to get a sense of what contribution Social Security will make to your retirement income. This projection can also help you start to think seriously about the pros and cons of retiring early or working longer to achieve the maximum annual benefit.
3. Reassess your retirement goals