4 Financial Habits to Break After Age 50 If You Want to Retire on Time
With less time to recover from mistakes, these are the money habits to leave behind as retirement approaches.
Summary
Ron Tallou explains how to gauge whether your fixed income sources will cover retirement, and why speculative stocks and large new debt become far riskier as you near the end of your working years.
Reckless spending, ignoring savings and taking huge financial risks are potential losses many young people can and do recover from. With less time, recovering from mistakes becomes more difficult, so it is essential to reevaluate your approach to money management, investment and savings. Here are four financial habits to break after age 50 if you want to retire on time.
Believing you have time
Time and money are precious commodities the closer in age you get to retirement, said Elizabeth Buffardi, founder of Crescendo Financial Planners. "When you are young, you feel like you have all the time in the world to prepare for something that is 30 to 40 years down the road. And then all of a sudden, you are 50 and realize that you have a lot of ground to make up and not a lot of time to do it."
Not knowing where you stand
Understanding your money streams during retirement, such as pension, Social Security or rental income, and whether they will be enough to live comfortably, is critical as those over 50 near retirement.
"If there is enough between fixed sources to live comfortably, then you don’t need to change your spending habits," said Ron Tallou, an investment advisor and founder of Tallou Financial Services. "However, if the fixed sources are not enough, then you need to look at your retirement accounts and have a withdrawal percentage of your total accounts that you will need before taxes to make up the difference."
Tallou said it was best to work with a financial advisor because they typically have software that indicates whether a client's needs will be sustainable for a 30-year retirement or whether they’ll have to cut certain habits.
Investing in speculative stocks
"Stock and crypto that you know nothing about and hoping to get rich might be something you can get away with when you are younger, because even if you lose it all, you have decades ahead of you to make it back," Tallou said. "However, if you are nearing retirement, those types of losses can cause you to delay."
Taking on large debt
Financial experts said taking on large debt such as a high mortgage, car loan or student loan will delay retirement plans. "Loans are much more manageable when you’re younger, because when you retire you are most likely going to drop down in income," Tallou said.