KNOXVILLE (WATE) – The approach of a milestone birthday is a reminder that as life changes, so do your needs and circumstances.
At the age of 50, you want ask yourself if you have your debts under control. You don’t want to drag them in your 60s. You add new debt only when you can easily handle it. For example, you pay credit card balances before interest is applied.
As outlined by “The Charles Schwab Guide to Finances After 50,” follow the 28 percent rule. An industry rule of thumb suggests that no more than 28 percent of your pretax household income should go to servicing debt on your home. The 36 percent rule says, no more than 36 percent of your pretax income should go to all debt: your home, plus credit cards, and auto loans.
With children possibly gone from the home by the time you’re 50, you may have more money on hand now, and it’s tempting to spend it. Don’t shortchange retirement goals. Once in your 50s, probably the best earning years of your life, that’s the time to double down on savings.
Set a retirement income goal now so that, if you are short financially, there’s time to improve things. There are a couple of approaches. One is to shoot for saving six to nine times your annual household income by your mid-50s to early 60s. For example: If you earn $60,000 a year, your IRA or 401K should approach $360,000 to $540,000 as you near 60.
Once you set a goal, keep increasing the percent for retirement. Make the increases so small they’re hardly noticeable. If you’re saving six percent, inch it up to seven percent, and then onward. If you’re diverting 12 percent to savings now, bump it up to 13 percent.
Now, if you want control over what happens to your money and property, you will need a will. If you don’t have one, a probate court will decide what to do with your assets and that’s not good. A will gives voice to your decisions – what you want for your children, what happens to possessions with financial or sentimental value.
As life changes, so should your insurance. If your children or spouse would be lost without your salary, get enough life insurance to carry them through if you pass away. Take a look at your home and auto insurance limits, too. Enlisting an insurance agent to review your needs should be part of your retirement plan.