Financial Planning in your 50s, Why it is Important?
Turning 50 is special by all means, as it opens up a new set of opportunities and also the perfect time to start enjoying your life with all the wisdom and money you’ve earned. But, it also throws a few challenges, as you’ve now only a decade left to your retirement, and have to ensure your retirement kitty is fully stocked up.
At the same time, you’re either preparing for your children’s college fees or paying heavily for it, their marriage costs, and also you’ve to look towards your health costs. Though, you’re likely to be in your peak earning phase, so you can well handle the challenges, but still, you need a financial plan to meet these goals.
And, it is different from what you have done in your 30s and 40s to reach this stage. So, let’s learn what your financial plan should include in your 50s to manage your finances.
Focus on your savings
It’s that phase of your life, where you need to rebalance your portfolio towards debt instruments to safeguard your savings from market volatility. Your goal should be to safeguard your funds, not maximising returns.
For example, if you’ve invested in equity funds, you should transfer your investment to balanced funds and in your late fifties, you should move to debt funds.
By following this strategy, you not only safeguard your investment from market volatility but also ensure steady and stable returns.
Plus, you need to save more or adjust the saving rate according to the inflationary situation, so that you never feel short of funds at retirement.
Pay off all your loans quickly
During this phase of your life, you should be more concerned about your retirement kitty and meeting other financial goals, not regarding loans.
If you’re carrying a loan, you should focus on paying off the debt as quickly as possible. Increase your EMI amount, to shorten the payback tenure. There is no economic benefit if you’re simultaneously saving and paying for your loan. Paying back quickly helps to reduce the effect of compounding while calculation of interest expense.
Also, don’t burden yourself with a new loan at this stage, as it could significantly reduce your financial flexibility.
Invest in a health insurance scheme
You’re still years away from retirement and your current employer pays your medical bills, but what after your retirement. And, the cost of quality healthcare is rising continuously.
Therefore, it is always wise to take a health insurance scheme before you turn 50. It will help you save a ton on the premium amount and will also help you to skip the rigorous medical tests required for taking a health insurance policy.
If you already have a health insurance cover, consider revising it to match the rising costs of today’s healthcare system.
Reduce your expenses
As you move towards your retirement age, your financial responsibilities towards your family decrease. You children may have started earning or got married and no big expenses to look after. Therefore, you can reduce your unnecessary expenditure and make more money available for the retirement fund.
You can also increase your contribution towards PF through VPF- voluntary provident fund scheme. Your saving rate should increase to a minimum of 50% of your incomes in your 50s to have a comfortable retirement life.
Your 30s and 40s are mostly spent on fulfilling your responsibilities towards your family, and in a way, you give less focus towards your retirement. However, by the time you reach your 50, you should start focusing on securing your finances once again. In short, you can turbocharge your savings.
A good financial plan and few wise financial decisions at this time will help to make your post-retirement life much easier and happier.
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