Your 50s and early 60s are an interesting period, financially speaking. Some of your kids may have moved out of the house at the same time your peak earning years have arrived. Now’s the time to live it up by buying that nicer car or taking the vacations you never had time or money for when you were shuttling kids to activities and saving for college. Or is it?
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It’s not uncommon for spending to increase in your 50s. In 2023, the most recent data available, Americans aged 43 to 58 spent more than any other age group, reports the Bureau of Labor Statistics. And the reality is that you deserve to enjoy the success you’ve worked hard for. If you couldn’t afford a sports car in your 30s because you had daycare to pay for, and it wasn’t a feasible purchase in your 40s because you were deep in college savings mode, then why shouldn’t you have it now?
One thing you don’t want to do, though, is indulge in too much 50-something lifestyle creep. Increasing your spending too quickly and to too much of an extreme could come back to bite you in retirement. Here’s how to strike a good balance and avoid going overboard.
Keep paying yourself first
Vanguard reports that the average 401(k) balance for people in their early to mid-50s was $188,643 as of 2024. For folks in their mid- to late 50s, it was $271,320. Your 50s may be the time to play catch up on the retirement savings front. Or maybe you’re in good shape already, in which case it’s important to keep up that momentum.
Before you bump up discretionary spending, make sure your IRA or 401(k) contributions are still on track. And if your monthly contributions need a boost, automate that increase before committing to bigger expenses. If you can swing that new sports car while also meeting your goal of saving $500 more per month for retirement like you always planned, there’s no harm. You just don’t want your savings to fall by the wayside.
Set or revisit financial goals
If you’re in your 50s, retirement might be 10 years away or less. Now’s the time to ask yourself what you’re hoping to achieve financially during the tail end of your career.
In addition to boosting your savings, you may have the goal of accelerating your mortgage payments to be free of housing debt in time for retirement. Or maybe you’re hoping to buy a vacation home in another part of the country and do the snowbird thing once you’re no longer tied to a job. You don’t want to derail major financial goals by spending too aggressively now. Before you take on new expenses, revisit those goals and set priorities.
Be careful with new debt
Your 50s are a pretty terrible time to take on new debt, namely because the more money you spend paying off loans or credit cards, the less you’ll have on hand to save for retirement. Plus, it’s always a good thing to avoid kicking off retirement with debt.
Experian says Gen Xers ages 44 to 59 have an average of $30,879 in non-mortgage debt. When we factor in mortgage debt, that number rises to $283,677. If you want to retire debt-free, be careful about financing an expensive new vehicle at 57. And while you may be eager to do the home renovations you always put off, proceed with caution if it means having to take out a $50,000 HELOC at 53 that you’ll be paying off for years.
Splurge mindfully
When you’re earning a nice paycheck and are finally at a stage of life when it’s okay to focus on you, it’s natural to spend more in key expense categories. And you should allow yourself to do that. The key, however, is to do so mindfully.
Rather than throw money at things on a whim, ask yourself which splurges will enhance your life in the near term in the most meaningful way. If you didn’t travel as much as you wanted to while you were raising kids and you don’t want to risk missing out on opportunities in the event of declining health, it could be worth increasing your travel budget. It’s also okay to spend on conveniences that give you more time to enjoy your non-working hours. That could mean springing for a house cleaner or lawn service so you don’t have to do the work yourself. The key is to make sure that extra spending does something significant for your life.
Reaching your peak earning years should give you the green light to live it up a bit. But there’s a difference between doing that and compromising your financial security in the long run. Strike a balance and stay focused on long-term savings so you can enjoy your 50s to the fullest without risking financial issues in your 60s and beyond. And, as always, consult with your own financial advisor for specifics about your situation.
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