If you want to be wealthy in retirement but think it’s out of reach, think again! It’s not something you can do overnight, as it requires strategizing, planning and often living frugally.
However, experts explain that if you want to be wealthy in retirement, you need to hit these money milestones before the age of 50.
Adopt the Right Money Mindset for Your Age
Hitting financial milestones before 50 isn’t merely about hitting numerical targets; it’s necessary to take the right money mindset that should evolve with age, according to Khwan Hathai, a certified financial planner and certified financial therapist at Epiphany Financial Therapy. She breaks down how this mindset should look at key ages along the way:
- 20s to 30s mindset: In your younger years, Hathai recommends you adopt an “Invest in me” attitude. According to her this means, “Eliminate student loans and high-interest debt as early as possible. Begin investing with an adventurous spirit, think high-risk, high-reward assets like equities, if they align with your risk tolerance.”
- Late 30s to 40s mindset: As you stretch into further adulthood, Hathai said you need to transition into a “Wealth multiplication” frame of mind. “Typically, this is your peak earning window, so the mindset should shift toward aggressive savings and targeted investments. Consider adding tangible assets like real estate to your portfolio.”
- Approaching 50 mindset: As you close in on 50, it’s time to adopt a “Legacy and longevity” perspective, Hathai said. This includes aiming to save between six and eight times your annual income. “Your focus should pivot to wealth preservation. This is the time to diversify into safer, but still productive, assets like high-quality bonds, dividend-paying stocks, or even certain types of annuities that can provide a stable income stream in retirement. The objective is to maintain capital while still generating a moderate return, so you’re not eroding your nest egg.”
Get Serious About Your Retirement Savings
Expecting an employer or a pension to pay for your retirement is foolhardy, according to Christopher Stroup, a certified financial planner for Abacus Wealth Partners. “Retiring at 65 with a pension for a company you’ve worked for over two decades is likely not baked in reality. You should strive to save enough to cover your living expenses for each year you might live after retirement. A great baseline for saving enough for retirement is to allocate 15% of your gross income to your retirement accounts.”
Pay Off Your Mortgage
Paying off your home is probably one of the biggest items in your budget, Stroup said, and one you want to offload as soon as you can. “When living on a fixed income in retirement, you probably don’t want to worry about making a mortgage payment each month. Striving to pay off your mortgage as soon as possible can be a smart goal to reach by 50.”
Manage Your Debts
You won’t make much progress toward wealth if you’re stuck in the past, financially speaking, by carrying debts, according to Mark P. Eid, managing director of Acts Financial Advisors. He suggested you have “Superior debt management,” with a focus on paying off high interest debt and using low interest debt strategically.
Maximize Career Earnings
While you might see 50 as moving toward mid-career, Eid pointed out, “Oftentimes from age 50 to 65 is when professionals are at peak earning potential. This is the time to make sure you are negotiating for [the] best salary or finding the position that will pay you what you are worth.”
Contribute to Investments
You want to make sure you are contributing regularly to investment accounts before 50, Eid said. “If possible try to save and invest at least 15-20% of inflows.”
Additionally, Eid recommends adopting the following strategies depending on which decade of life you’re in:
- Twenties: This is the time to “focus on gaining education, skills, and/or training that provides a service or product in high demand,” he said. “Investing in yourself will pay dividends in the future.”
- Thirties: This decade is the time to focus on debt repayment and try to have high-interest debt completely repaid or near repayment, he said. Additionally you want to “maintain a high credit score history to achieve favored lending rates; develop systems for saving and investing; hire a good financial advisor; and start college savings for children, if applicable.”
- Forties: In your forties you want to get on top of trying to save and invest at least 15% to 25% of your gross income and, if possible, diversify income streams.
Set a Net Worth Goal
Eid explained that a Net Worth USA study found that people in the top 5% of net worth in the U.S. had $1,030,000 in net worth. “So, based on the assumption that a 60%/40% stock/bond portfolio returns at historical numbers of 8%/year, compounded annually,” he recommended:
- at age 25 one should have $157,699 in net worth
- at age 30 one should have $231,712 in net worth
- at age 35 one should have $340,461 in net worth
- at age 40 one should have $500,249 in net worth
- at age 45 one should have $735,029 in net worth
All experts agreed that you should also be sure to engage with a financial advisor you trust as soon as you can. They’ll be sure to steer you in the right direction and help you understand your unique financial outlook.
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