Rethinking Your Finances in Your 50s
Turning 50 can be a wonderful landmark in your life and personal finance journey. This is when you are at the peak of your career as well as meeting all your family obligations. However, financial planning remains an important responsibility and depends on the scenario you’re in.
Jul 2022
3 mins read
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If you already have a financial plan in place, this is a good time for an assessment of your plan. If you haven’t started financial planning, then this is a good time to start. A critical aspect of any financial planning at this stage would be to consider investments for retirement planning.
However, before we get into financial planning, let us first understand how to evaluate your financial health in this phase of life.Five financial questions to ask in your 50s
| Question | Answer |
| How much corpus do I have? | Calculate your current and expected expenses, your investments and your goals. Calculate your corpus durability by taking into account inflation as well as rising lifestyle costs. |
| How much do I need for retirement? | Since your steady cash flow may stop/reduce after retirement, you need funds to manage your monthly expenses, medical and travel expenses. |
| How much should I invest every month? | To calculate your investments, you need to know how much savings you require and identify your risk appetite. |
| What kind of funds should I invest in? | Ideally, once you’re over 50, you should invest in equities in moderation, e.g. into large cap funds, and move more to balanced or debt funds. |
| How much should I save? | The idea behind saving is to ensure your income exceeds the inflation rate as well as your rising costs. 35-50% can be an ideal percentage to save. |
Seven elements of financial planning in your 50s (and what to do with them)
What are the financial goal planning priorities you should have in your 50s? There could be many different responsibilities to look forward to, including saving money, preparing for retirement, children’s education, etc. Here’s a personal finance guide to help you sail through your 50s:
● Debts and Loans: Pay them Off – In your 50s, you’ll need to plan seriously about paying off your loans and debts to ensure you won’t have to worry in your 60s about paying your home loans or debts from your retirement corpus.
● Retirement Plan: Take it Seriously – Many fall into the trap of underestimating how much money they require for retirement. Your retirement planning should be such that it’s able to replace your salary once you retire. Since your earning capacity is likely to be at its peak now, it’s best to channel earnings into the right investments for retirement planning. For instance, you can consider increasing your PF contributions and avoid spending on unnecessary things. Ideally, your savings rate should increase with age - from10-15% in your 20s to about 35-50% by your 50s.
● Savings: Stock them for Future Emergencies – This is an age when you may be faced with multiple responsibilities, such as your children’s education or marriage. However, it’s wise to keep aside some of these savings to maintain your emergency fund. Since you may have a considerable income, you may keep adding to this fund to handle any future emergencies.
● Expenses: Reduce Them – By the time you are in your 50s, the number of your dependents may decline. You may also have a sizeable income that you can use to contribute more to your retirement fund. You should not withdraw from this fund to pay for physical assets such as houses, cars, and appliances. Downsizing unnecessary expenses will help you retain more funds for retirement.
● Investments: Diversify your Portfolio – Financial mistakes can be critical in your 50s. Moreover, wrong investments will disrupt your retirement strategy. However, appropriate diversification at this stage can be helpful. Keeping a small portion in high-return investments can be explored at this point since it’ll help you prepare for a time when you’ll need funds. For example, if you have a good risk appetite, you can earn good gains from long-term stock investments.
● Post-Retirement: Plan for Career – After retirement, it might be worth exploring an alternative career. This career can be based on the hobbies or interests you have. You can also consider taking up a relatively stress-free part-time job. This will help you to manage your daily expenses. In your 50s, you can lay the groundwork for this new career.
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This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
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