Once upon a time, turning 50 meant you were "over the hill." Today, 50 is the new 40 and according to researchers at the International Institute for Applied Systems Analysis and Stony Brook University, 60 is now middle-aged.
As you move into your 50s, thoughts of retirement -- and how well you've invested -- may become more frequent. A 2015 report from the Transamerica Center for Retirement Studies found that 43 percent of workers 50 or older say they fear outliving their savings in their later years.
Making some adjustments to your investment portfolio in your 50s may be necessary to ensure that you don't end up with a shortfall. Take care, however, to steer clear of these missteps that could negatively impact your retirement plans.
Investing conservatively too soon. Shifting into more conservative investments can help minimize risk as you get closer to retirement but you don't want to jump ship on stocks too soon, advises David Edwards, president of New York-based Heron Wealth.
"Stocks are volatile but they generate the high long-term returns needed to protect against longevity risk," he says.
Besides that, says Edwards, stocks are also an inflation hedge. When companies can raise prices in an inflationary environment, that passes through to revenues and earnings, which pushes up stock prices.
Martin Schamis, vice president and head of wealth planning at Janney Montgomery Scott in Philadelphia, says the right timing takes on a new emphasis as life expectancies get longer.
"A 50-year-old born in 1966 can expect to live an additional 30-plus years, according to the most recent data from the Social Security Administration," Schamis says, meaning that after age 50 you should still be investing your retirement assets to grow and last for several decades.
"Stocks, for all the drama they can introduce, are the best way to grow a portfolio for the long term while bonds remain a great way to help stabilize the portfolio and reduce volatility," he says.
Not taking full advantage of an employer's retirement plan. If you have access to a 401(k) that offers a matching contribution, making the most of it in your 50s is an opportunity you can't afford to miss, according to Richard Thompson Jr., owner and founder of Atlanta-based Advanced Legacy Concepts.
"I teach my clients to look at their company match as a sort of buffer being provided to protect their hard-earned dollars that they've contributed to their company plans," Thompson says.
Everything contributed above the company match, he says, is "naked money," which is being fully exposed to the "elements" of possible market losses and federal tax rate increases when they need to withdraw these funds in retirement. Matching contributions can be viewed as a bonus if conditions remain in your favor in terms of taxation and investment performance.
Schamis says investors 50 and older shouldn't skimp on making catch-up contributions, particularly if they've gotten a late start on saving for retirement. For 2017, the annual catch-up contribution limit is $6,000, in addition to the $18,000 regular contribution limit.
"If you just turned 50 and plan to retire at age 65, this means that even at a relatively conservative 5 percent rate of return, you could be missing out on over $135,000 in future value in your 401(k) by skipping out on catch-up contributions," Schamis says.
Choosing investments that are a mismatch. Where you invest is just as important as how much you invest after 50 and getting it wrong could prove costly.
Robert Baltzell, president of RLB Financial in Valencia, California, encourages older investors to look at the bigger picture when considering an investment. He says 50-somethings should ask themselves whether a particular product or strategy will help them accomplish their goals and make a plan that takes into account their income needs, taxes, health, legacy and risk tolerance.
"Remember, it's not the product's fault for being wrong for the investor," Baltzell says, if it's the wrong product for the investor's overall plan and needs.
Edwards says older investors may be short-sighted when attempting to create an income replacement strategy, which could result in taking on too much risk. He points to moves like buying illiquid securities such as private placement real estate investment trusts or making investments in fee-heavy variable annuities that may hinder your portfolio growth rather than encouraging it.
Thinking in the short term can be problematic for a different reason, says Kathleen Grace, managing director of United Capital in Boca Raton, Florida.
"Many older investors chase past performance of mutual funds and end up having to postpone retirement when last year's hot fund blows up this year," Grace says, whereas stocks require a longer time horizon.
"If you'd invested in a fund mirroring the S&P 500 throughout 2008, a year that saw the index decline by 37 percent, it would have taken you a full four years to make up the losses," Grace says.
Take care to avoid tunnel vision when it comes to your portfolio's current yield, says Anthony D. Criscuolo, a certified financial planner and portfolio manager with Palisades Hudson Financial Group's Fort Lauderdale, Florida, office.
"Investors should focus on their portfolio's total return -- both its income and capital appreciation," Criscuolo says.
Some investments may have a higher yield while others may prove to be better in terms of the potential for higher capital appreciation. Still other investments may have low yield and low growth potential but be less volatile. Making sure that you're covering all the bases with your investments in your 50s and beyond is vital for balancing growth with risk.
Doing nothing. If you've been investing steadily for retirement, you may assume that you can keep your plan on autopilot once you turn 50 but that could prove dangerous, says Jay Ferrans, president of JM Financial and Accounting Services in Southfield, Michigan.
"When you're young and accumulating assets for retirement, the ups and downs of the stock market have a much smaller impact," Ferrans says, but when you're older and taking withdrawals in retirement, that can lead to problems if you're not prepared.
Aside from considering how market swings may impact your investments in the decade or so leading up to retirement, Baltzell says that many pre-retirees don't think about where tax planning fits into the picture.
"Investors have to ask themselves when I retire, will tax rates go up? Will I be in a lower tax rate than I am now? How will rising tax rates, inflation and health care impact my retirement plan over 30 years," he says. "Making a solid plan for those tax fluctuations is crucial."
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