By the time your 40s hits, you’ve probably established a routine with your finances and feel like you have a pretty good understanding of money matters. But there are some mistakes you could be making that could hurt your security in retirement.
- Lacking a financial plan
Saving like you were in your 20s and 30s won’t cut it anymore. As your earning potential increases, so should your emergency savings and retirement contributions. (And a Money Market Savings account at First Internet Bank is a great place to store your emergency savings while earning interest at more than 7x the national average.*) It’s also time to have tough conversations with your partner and/or financial planner to address when you are going to be able to retire and how you will live in retirement.
- Spending too much on your home
Just because you can afford to supersize your home or make a major renovation, doesn’t mean you should do it. Do you need the extra space for your family or is it for stuff? You don’t want to be paying for a mortgage or home equity loan well into retirement or making loan payments that take away from saving for your future. You might even consider cutting your mortgage payments by downsizing your home if it’s more than you need.
- Saving for college over retirement
We know you would do anything for your children, but paying for a college education at the expense of your retirement can hurt you in the long run. You can take out loans specifically for higher education, but not for retirement. Help as you can, but don’t sacrifice your own future in the process.
As your earning potential maximizes in your 40s and 50s, you may be tempted to spend on luxury items like extravagant vacations, the latest electronics or upgrading your car, but now is not the time to accumulate credit card debt or to sacrifice emergency savings, retirement funds or your children’s higher education for the sake of passing pleasures.
- Borrowing from your 401k or Individual Retirement Account (IRA)
Simply put, don’t do it. In fact, go the opposite way, and increase your contributions as your salary increases. At age 50, use tax refunds, bonuses and higher earnings to contribute to 401k or IRA catch-up opportunities. Retirement saving should be a good habit you have by now so don’t break it!
- Carrying debt
By this point, your debt, besides maybe a home or car loan should be minimal. If you DO have debt, focus on paying off accounts with high interest rates like your credit card or depreciating value like your car.
- Becoming complacent with your health
Taking care of your health can be a big saver as healthcare costs accumulate quickly. Maintaining a healthy diet, making time for exercise you enjoy and sticking with routine care such as dental cleanings and physicals can save you long-term on healthcare costs and lead to a fuller life.
Avoiding these seven mistakes will add up to financial savings in the long run. And following these guidelines might even help you retire earlier!
As always, First Internet Bank is here for you throughout all the phases in your life and ready to partner with you for your savings goals. If you need any assistance, please contact one of our knowledgeable Relationship Bankers today.
*The National Average Money Market APY (annual percentage yield) provided by Bankrate.com was 0.12%, accurate as of 10/10/2017.