3 Steps to Building Wealth in Your 50s (2024)

For many people, turning 50 signals a shift in the way they approach their finances. If you have kids, they’re probably preparing to leave the nest and you may just be hitting your stride in terms of your earning power. With retirement looming, now’s the time to amp up your efforts to save. Whether you’re a late bloomer or you’ve been socking money away steadily over the years, here’s what you can do to enjoy a rich retirement. A financial advisor can help you create a financial plan for your needs and goals in your 50s and beyond.

1. Leverage All of Your Savings Options

For 2023, the regular contribution limits for a 401(k) and IRA are set at $22,500 (which increases to $23,000 in 2024) and $6,500 (which increases to $7,000 in 2024), respectively. If you’re 50 or older, however, you get a bonus in the form of catch-up contributions of another $1,000 per month for an IRA and $7,500 for your 401(k).

In addition tothese two options, you have another way to save if you have a high-deductible health insurance plan. For 2024, you can save up to $4,150 (up from $3,850 in 2023) in a health savings account (HSA) if you have an individual plan and $8,300(up from $7,750 in 2023) if you have a family plan. Once you turn 65, you can tap this money penalty-free, although you will pay taxes on any distributions that don’t go toward qualified medical expenses.

2. Be Strategic About Paying Down Debt

Carrying credit card balances, student loans or mortgage debt into retirement is a risky move, especially if you know that your income is going to go down once you’ve stopped working. In your 50s, it’s best to focus on eliminating as many of your financial obligations as possible so you can head into your golden years with a streamlined budget.

That being said, there are some rules to follow when it comes to paying off debt. Before you begin making your monthly payments, it’s important to make sure you’re maxing out your retirement accounts. At this stage in life, you can’t afford to delay your savings.

While you’re paying down your debts, you can tackle the ones that are costing you the most first. Then you can look for ways to make your other payments less expensive. If you have credit cards, for example, transferring them to a card with a lower rate can potentially save you some money on interest. If you’re thinking of refinancing your mortgage, it’s best to run the numbers to get an idea of what you can save.

3. Manage Risk Carefully

Puttingyour money in a savings account may give you a sense of security but it’s not going to make you rich. Investing in stocks and mutual funds means taking a bigger gamble, but it can generate substantial returns in the long run.

If you’ve been fairly aggressive about investing up to this point, you may need to rethink that strategy. Someone who’s in their 30s and has years to go before they retire is in a better position to rebound from a market decline than someone who’s in their mid-50s.

That’s why it’s a good idea to take a look at your portfolio’s asset allocation to see where your money is concentrated. If you’re still investing heavily in stocks, now’s a good time to begin easing towards more conservative investments. You may see your returns reduced slightly but the trade-off isthat you’ll bebetter insulated against market volatility.

Bottom Line

Building wealth is something just about anyone can do with enough time and the right tools. If you’re in your 50s, your retirement is probably not too far away. But it’s not too late to create a comfortable financial cushion for your 60s and beyond.

Tips for Smarter Money Management

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