Last week I discussed some money management tips that are relevant in your 20's and 30's. This week we'll talk about tips for your 40's and 50's.
In your forties, you're probably pretty comfortable handling your finances, but it may be difficult with so many expenses. You are most likely dealing with homeownership, your children and their education, debts, and possibly even your parents' finances. But despite all of this, now's the time to get serious about retirement. 60% of people have workplace retirement plans or individual retirement accounts; which is good, but not good enough. The 40's is a crucial decade for building wealth. Make retirement a real goal. At the very least, take advantage of workplace retirement accounts and contribute enough to get the full match your employer offers. You need this money because the average monthly Social Security benefit received by retired workers is $1,160.
If you're in your 50's, you can't afford to waste any time. You are probably at the highest income level of your career. If you know you haven't saved enough for retirement, take advantage of catch-up contributions to your 401k, 403b, or IRA. The IRS allows individuals who are age 50 and over to make annual catch-up contributions of up to $5,500.
Another thing you can do is get rid of any remaining debt; start freeing up cash flow and reducing expenses. Also, consider your estate plan. You probably drafted a will back when you had children and haven't reviewed it since. Now's the time to update it and make sure it's complete.
Managing money is a life-long commitment. Make sure you are on track. If you are interested in more information on saving and investments click here>> Thanks for reading.
The economy is taking its time to recover, but that doesn't mean you have to sit by and wait for things to get better. Now is the time for you to take control. American workers lost an average of 27% in their 401(k) in 2008. This has left people asking, "How much will I need to retire?" and "Will I have enough?" To begin to answer these questions, you should project your financial needs in retirement and understand your sources of income.
For example, if you want to maintain your current lifestyle in retirement you may need as much as 70% of your pre-retirement salary per year. When deciding what is right for you, consider factors like, is your mortgage paid off, do you have other debt, do you have a pension, how is your health, and will you be able to receive health coverage.
When determining where the money is going to come from, be realistic. Pensions are being eliminated. You are the only one looking out for you. This year, the maximum retirement benefit from Social Security for those at full retirement age is under $28,000 a year. That means any amount you need above $28,000 will have to come from your retirement account. The average 401(k) balance is $50,200, which won't last long enough when the life expectancy is 85 years for women and 82 for men.
So, what can you do? Start saving or start saving more. But be conscious of your investments. Don't try to play catch up by investing too aggressively. If you have a lot saved, you don't need to take on extra risk, and if you are way behind, you can't afford the risk.
Last week, I shared a link with tips about how to rebuild your 401k if you've incurred losses due to the stock market. This week, let's focus on how to avoid losses in the first place. The article below discusses the different emotions that can come into play when you invest and steps you can take to make the most rational investment decisions.
Don't Let Emotions Influence Investment Decisions- WSJ.com
"In the 12 months following the market's peak in October 2007, more than $1 trillion worth of stock value was lost from 401(k) and other defined-contribution plan accounts." Chances are this fact doesn't shock you. Millions of Americans have watched the value of their 401k decline, but it looks like the stock market is finally recovering and it's time to start rebuilding. So what can you do to recover your 401k losses? Check out this link for some tips: Five Ways to Fix Up Your 401(k)s
What else are you doing to rebuild your 401k? Feel free to share your thoughts with other readers by commenting on this post.
This week, let's talk about retirement accounts. Investors in the U.S. Stock Market have lost more than $10.4 trillion since its peak in October 2007. American workers lost an average of 27% in their retirement plans in 2008. The average balance declined from $69,000 in 2007 to $50,000 in 2008.
Face it. There are only 2 ways to pump up the balance in your retirement account: earn more on your investments or save more money. And you can't count on supersized gains in stocks and real estate anymore. So, try to pump up your savings. Investing just enough for the company match doesn't cut it. Push yourself as close to the limit as you can. The limit is $16,500 for a 401(k) and $5,000 for an IRA. Don't stop contributing! The AARP reports that 20% of workers 45 and older have stopped putting money into their retirement accounts. I'm telling you right now, that is a huge mistake.
And for those of you trying to save for a child's college tuition, do not forgo saving for retirement to save for college. Retirement comes first. You can't take out a loan to retire.
Try to work longer. The average age Americans retire is 60. If you can work until 67, when anyone born in 1943 or later qualifies for full Social Security benefits, you'll gain time to save more and you'll cut down the number of years you'll be tapping your nest egg.