If you're in your 50s, it's time to fasten your seatbelt and begin making your final descent towards your financial goals. And if you stop making these five money mistakes now, soon you should be able to put your finances on autopilot.
1. Not Maxing Out Retirement Accounts or Making Catch-Up Contributions
Your retirement accounts offer the biggest tax incentive for your money. Hopefully, you're not only making the maximum allowable contributions, but are also taking advantage of catch-up contributions. In 2015, persons age 50 and older are eligible for yearly catch-up contributions in the amounts of $6,000 for 401(k) accounts and $1,000 for IRAs.
2. Not Paying Off Large Purchase Items
It's time to pay off those big-ticket items. Your mortgage and automobile titles need to be free and clear of encumbrances. Typically, these will be a household's two biggest expenses, and they can easily become burdensome for anyone living on a fixed-income.
3. Not Getting Insurance Policies
Failing to adequately insulate your family from life events will dramatically impact your finances. Make sure your family has enough life insurance, proper health coverage, property insurance, and disability insurance. Also, consider adding long-term care to your insurance policy. Long-term care coverage is expensive, but will save you money in the long run should you or your spouse ever need assisted care. All or a portion of the costs for these services would be covered.
4. Taking on New Debt
By now, I hope you've begun enjoying the peace of mind and freedom that stems from being virtually debt free, because your major debts should be almost paid off. And being a few short years away from retirement is not a good a time to start assuming new debts — lines of credit, student loans, second mortgages, car loans, etc. One of the biggest debt challenges facing middle-aged Americans today is helping children with student loan debt. The best solution for this is to put as much of the loans in your child's name, assuming only the portion that they can not reasonably afford to pay. When that's not an option, consolidate and pay them off as soon as possible.
5. Not Rebalancing Assets
One of the most important things you can do to help your investment portfolio is rebalance it. As you near your target retirement age, you should start shifting your assets towards more conservative investments. Based on your age, and depending on your financial goals, a good asset allocation strategy might look something like, stocks 51%, bonds 13%, and cash 36%.
As retirement draws nearer, it's important to get your financial house in order to maximize your remaining working years. Stop making these money mistakes now so that 60 looks even brighter than today.