At one time, reaching age 50 meant that it was all downhill from there. These days, however, you need to be taking an active role in your finances from age 50 all the way to retirement. As you hit your 50s, thoughts of how well you’ve invested, and how comfortable your retirement will be, are probably going to pop up more and more. Here are a few big investment mistakes you need to avoid between now and retirement.
Going Conservative Too Soon
You’ve probably heard that investing more conservatively can help you lower your risk as you get closer to your retirement. This is true, but you really don’t want to abandon stocks too soon. Stocks may be volatile, but they can generate big long-term returns, which are essential for protecting yourself against longevity risks. Aside from that, stocks can be a great hedge against inflation. When companies are able to raise their prices in times of inflation, this will trickle down to revenues and earnings, which will bump up the value of stocks. Bear in mind that the average 50-year-old in 2017 can expect to live another 30 or more years. This means that having passed age 50, you should still be investing in your retirement assets to grow, and last you for another few decades.
Not Taking Advantage of your Employer’s Retirement Plan
If you’re employed and have access to a retirement plan, you need to be making sure you’re milking it for all it has. Private and federal retirement planning can be a hotbed for financial mistakes and missed opportunities, so don’t let anything slip through your fingers. For example, if you have access to a 401(k) that offers matching contributions, you should be pumping as much as you can in during your 50s, thereby maximizing your returns. Try to see your company matching scheme as a kind of buffer provided to protect your hard-earned dollars which you’ve contributed to the company retirement plan. Anything that’s contributed above the company match is greatly exposed to all the dangers of the economy; possible market losses, federal tax rate increases, and other things that can come back to bite you when you finally withdraw these funds. If you’re past age 50, don’t hold back on making “catch up” contributions, especially if you had a late start saving for retirement.
Picking Investments That Don’t Match
The assets you invest in are just as important as how much you invest in them after age 50, and making mistakes here can wind up costing you a small fortune. Older investors always need to keep the big picture in mind when investing for retirement. Ask yourself whether a particular strategy or service will help you towards your long-term goals, and form a plan that will accommodate all your income needs, health, taxes, legacy, and tolerance for risk. Remember, it’s rarely an asset or product’s fault for being wrong for the investor, it’s the investor’s fault for choosing one that didn’t mesh with their endgame! Always think in the long term when investing and tweaking your portfolio.