How To Invest in Your 50s

Your 50s are an exciting time, with retirement right around the corner — which is why it’s super important to pay attention to your investment portfolio and ensure you’re on track with your finances.

As you get ready to make the most of your money and enjoy your golden years, here are a few investment goals to set.

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Catch Up on Retirement Contributions

If you can, put more money into your 401(k) or IRA (or both). 

When you’re in your 50s, you’re allowed to boost your contributions beyond the usual limits. As of 2024, you can make catch-up contributions of:

• $1,000 in an IRA
• $7,500 in a 401(k)
• $3,500 in a SIMPLE IRA

Consider making catch-up contributions if you’ve maxed out your regular retirement contribution amounts. 

And don’t forget: You can have both a 401(k) and an IRA.

READ MORE: IRA vs. 401(k): Which One Is Better for You?

Prepare for Healthcare Costs

A significant retirement expense is likely to be healthcare.

One way to build up a healthcare nest egg is with the help of a Health Savings Account (HSA). 

If you qualify to open an HSA, you can set aside tax-advantaged money to handle these expenses. Many HSAs allow you to invest your dollars, helping them grow faster.

Plan to use at least some of your HSA for healthcare costs in retirement. As long as your withdrawals are used for qualified medical expenses, you won’t have to pay taxes on your investment gains.

Rebalance Your Investment Portfolio

Review your asset allocation and risk tolerance. As you approach retirement, you might decide to focus less on growth and more on income. 

You could change your allocation from 90% stocks and 10% bonds to something closer to a traditional retirement portfolio of 60% stocks and 40% bonds. 

Or, if you have a higher risk tolerance, you might decide on 75% stocks and 25% bonds. 

The important thing is to perform an assessment and adjust your portfolio accordingly.

Another consideration is whether you want to use a bucket approach in case the market crashes early in retirement. 

With this strategy, you put two to three years’ worth of needed expenses in a high-yield cash account — such as the SoFi Checking and Savings Account — so the money is ready when you retire. Then you bucket your other assets according to whether you need the money in the medium term or long term.

READ MORE: Why It’s Important to Rebalance Your Portfolio

Consider Long-Term Care Insurance

There’s a chance you might need to move into an assisted living facility late in retirement. 

If you’re not sure whether your portfolio balance will be enough to handle the cost, you might want to buy a long-term care policy. These policies are designed to provide a monthly benefit that can pay for your care in a comfortable facility.

Buying long-term care insurance in your 50s can help you save money on premiums. If you wait until you’re in your 60s, you might have to pay much more monthly for coverage. Run the numbers to see if they make sense for you.

Review Your Estate Plan

Depending on your situation, there are a few things to consider when putting together your estate plan. 

Consult an estate planning professional to help you review your options and make the appropriate arrangements.

Create a will

Ensure your loved ones understand your wishes with a will. 

You can use a will to designate who should get your assets and how you want your valuables handled.

Update your beneficiaries

Your investment accounts, life insurance policies, and bank accounts should have designated beneficiaries. 

If a beneficiary on an account differs from what you have in the will, the listed beneficiary gets precedence. 

If you’ve changed how you want your accounts handled, update your beneficiaries to reflect your will.

Designate proxies

Other important documents include your health directive and designating someone to make decisions about your care during a medical emergency. 

Choose someone with power of attorney to handle financial decisions if you cannot do so. All of your proxies should be carefully chosen and given legal authority.

Establish a trust

Depending on your situation, it might make sense to create a trust to hold your assets. 

This can make it easier to pass your wealth on with minimal involvement by the state and might have some tax advantages. 

Life insurance

Check if your term life insurance is about to expire and decide if you need to renew it or get a new one. If you have permanent insurance, double-check the benefits and decide if you want any accrued cash value. 

If you don't yet have any life insurance, consider buying some. You can use a marketplace like Policygenius life insurance to compare options and pricing.

READ MORE: How Much Life Insurance Do I Need for My Family?

Consider Your Living Situation

Your 50s are an excellent time to consider your living situation and how you want retirement to look. 

For example, maybe it’s time to downsize. Reducing your living expenses can help your nest egg to last longer. 

Also, cutting costs now and investing the savings can help you build a bigger portfolio — which will make you more comfortable in later years. 

Think about what activities you want to do in retirement, including travel, hobbies, or spending time with family. Prepare for those costs and begin thinking about where you might live so you can enjoy your desired lifestyle.

READ MORE: How Much You Need to Retire

FAQs

What investments are best in your 50s?

Generally, in your 50s, it’s time to start thinking of income-generating and relatively safe investments. You might increase how much you invest in bonds while maintaining some stocks in your portfolio. 

However, everyone’s risk tolerance is different, so choose investments based on your situation and portfolio goals.

How much should you have saved in your 50s?

Various rules of thumb are used to set savings goals. Some experts suggest that you should have seven times your salary saved by the time you’re 55. 

So, if you make $70,000 a year, aiming to have $490,000 saved in your 50s might be a reasonable target.

TL;DR: Investing In Your 50s

In your 50s, retirement may be just around the corner — and even if you haven’t invested as much as you’d have liked, there’s still time to get your finances in order.

Make use of catch-up contributions for your 401(k) or IRA, and rebalance your portfolio to minimize risk and maximize income-generating investments.

You’ll also want to consider future healthcare costs and living arrangements and ensure your estate is in order.

For more investing insights and advice at any age, check out these episodes of the Erika Taught Me podcast:

• Money & Investing Pitfalls To Avoid
• The Missing Piece in 99% of Financial Advice
• Investing Advice from the Most Powerful Woman on Wall Street

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