The following is a featured post.
By the time most people are in their fifties, they’re making a good salary, perhaps the most they’ve made during their career. However, they can feel competing financial strains as they struggle between assisting elderly parents and preparing or paying for their children’s college education.
Since retirement is likely only ten to fifteen years away, making smart financial decisions now is essential for a sound retirement. Ironically, when people are in their fifties and making a decent salary, they may have to be the most conservative with their money to prepare for a comfortable retirement.
If you’re in your fifties, you can’t go wrong with these three financial moves:
1. Refinance your home loan. If you still owe on your home, a worthwhile way to spend an hour or two is to check to see if you’ll benefit if you refinance home loan. Sure, you’ll likely have to pay some fees upfront to refinance, but if you’ll save on interest over the life of the loan, the fees may be a worthwhile expense to save money in the long run.
Depending on how much you owe and what your current interest rate and payment are, you may be able to pay off your home loan years earlier than if you hadn’t refinanced. Sometimes, refinancing gives you a lower monthly payment AND makes it possible for you to pay off the mortgage more quickly. Win-win! Going into retirement, being debt free will make your financial situation much more secure.
When you retire and own your home free and clear, you can live there for a relatively small amount of money. Or, if you sell, you’ll have all the profits from the home to add to your retirement nest egg.
2. Maximize retirement contributions. Because some people need to catch up on their retirement contributions, the government allows those over 50 to contribute more per year. For instance, the maximum amount a person under 50 is allowed to contribute to a Roth IRA is $5,500 per year, but if you’re over 50, you’re allowed to contribute $6,500 per year. If you are financially able, you should contribute the maximum you’re allowed to the retirement accounts that you have.
3. Wean your kids from financial support. Adult children now are taking longer and longer to become financially independent. Many older parents have had to delay retirement because they have diverted money to their grown children instead of contributing to their own retirement. If you’ve been assisting your adult children financially, now is the time to end the gravy train and instead take care of yourself and your own financial goals. Many adult children are living with their parents these days and you can find yourself paying for their food, gasoline, utilities, and many other expenses. One solution is to ask them to pay a little rent. They can’t live with their parents forever and they might as well get used to paying rent.
What other financial steps would you recommend for those ten to fifteen years from retirement?