The Most Important Steps To Building Wealth In Your 40’s, 50’s, & 60’s
Blog | August 19th, 2021
Living a life free of economic insecurity is a goal for most of us, especially when we are young and ignorant of the financial realities of adulthood.
As we grow older, the daily struggle to make ends meet and maintain a healthy work-life balance can overwhelm even the most financially stable individuals.
Building wealth in your 40s, 50s, and 60s doesn’t just ensure you have funds to pay bills and buy things. It also allows you to plan for a life of freedom and prosperity once you’ve retired.
Building Wealth in Your 40’s
By your 40s, chances are you know what you want out of your life and have garnered the experience necessary to reach those goals.
Though your 40s are still relatively youthful, it is still essential to begin thinking about your financial plans for the sunset years of your life.
Step 1: Start Planning for Retirement NOW!
Your employer might have retirement savings options, probably a 401k fund, and most 40-year-olds are enrolled in one by this age.
If you have yet to begin saving, start trying to set aside 15 to 20 percent of your yearly income to use in your retirement funds.
Step 2: Assess College Savings for the Kids
You might also have kids who are nearing college age right now.
Though their education is extremely important, no matter how much you want them to succeed, you have to be sensible when saving their tuition and college expenses.
Remember, while they can always borrow for college, it’s a lot harder for you to borrow for old age.
Step 3: Get Ahead On Your Financial Obligations
Paying off your mortgage (and other debts) when you still have a steady source of income is a lot easier than doing so with a fixed income.
You may be tempted to open a home equity line of credit or even borrow on credit to pay for expenses. However, you want to avoid adding on any debt. You can make minimum payments on accounts and focus your additional costs on the debts with the highest interest rates.
Once you turn 50, you can still look forward to 30 plus years ahead of you. They can either be years of hardship or years in which you thrive. Retirement is potentially a decade away. This means you must get serious about your retirement savings.
Step One: Utilize Catch Up Contributions
At 50, you are eligible to make “catch-up” contributions to 401ks and IRAs. A catch-up contribution allows you to make the maximum allowable contributions to your retirement accounts.
Step Two: Invest, But Responsibly
If you’ve never invested in the stock market before, first educate yourself on the many complicated aspects of trading stocks and bonds. For example, the rule of thumb has usually been that you reduce your stock investments and increase bonds as you age, but this may not always be the best option.
If you’re an experienced investor, consider giving your portfolio a bit of a make-over. If it’s not working to meet your long-term financial goals, it might be time to change up your strategy.
Step Three: Open a Health Savings Account
As we enter our fifth decade, one of the most significant expenses we face is medical care. This will only become more evident the older we get.
If your job offers a health savings account, don’t miss out on your opportunity to take advantage of it. If they don’t provide one, you can always open one on your own.
Though an HSA can help you save money to cover current health costs, it could supercharge your retirement savings if you pay these expenses out of pocket.
Building Wealth in Your 60’s
Once you make it to your 60s, building wealth becomes an entirely different scenario than in earlier stages of your financial preparations. Even if you’re just beginning your retirement journey in this decade, there are still things you can do to continue building wealth.
Everyone who has worked and paid taxes for 10 years or longer is eligible to earn Social Security. The amount you receive will be based on your highest 35 years of earnings.
If you really want to benefit from your Social Security savings, try waiting until you’re 70 or older to draw from them. You should try to think of Social Security as only a part of your retirement income, not your primary source.
Step Two: Take Advantage of Medicare
As mentioned earlier when we discussed HSAs, healthcare could end up being your most consuming expense. Besides a health savings account, be sure to enroll in Medicare as soon as you are eligible.
Medicare can cover many health care costs you accrue as you age. Enrolling in Medicare can take a large chunk of this growing financial burden from your shoulders.
Step Three: Don’t Be Quick to Pull Your Investments
Avoid withdrawing funds from retirement accounts for as long as possible, even once you’ve already retired. Obviously, you can’t keep them tied up in a savings account forever, but it’s wiser to wait until you are 72 to get the most return on them.
This is one of the best ways to keep building wealth, even into your 60s. There are many traditional ways to reorganize your portfolio and many innovative methods as well.
Building Wealth Secures Your Freedom to Thrive
Imagine your dream retirement scenario. What does it look like? No one wants to worry about how they will fare financially once they are too old to work.
Luckily, you don’t have to make a six-figure income to save for a happy, fulfilling, secure retirement. Whether you are in your 40s, 50s, or even 60s, building wealth is all about setting firm goals, sticking to them, and working towards financial freedom.