Money down the drain; photo by Rob Byron

GenX and Boomers: Don’t make these common money mistakes

ByDaria Kelly Uhlig

If you follow a common pattern, your 50s and 60s are likely to be your highest-earning years; but they’re also the years when missteps can have an outsize impact on your future wealth. Protect your finances now and in retirement by avoiding these common money mistakes.

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Not Planning for a Forced Early Retirement

Factors beyond your control can force you into an early retirement. Without a backup plan, you could spend down your retirement savings much sooner than you expected. Separate studies by the Transamerica Center for Retirement Studies found almost half of half of middle-class non-retired Americans plan to continue working after age 65, and more than half plan to work after they retire. Yet 58% of those who’ve already retired did so sooner than they’d planned. Health-reasons were the primary reason, and employment-related issues were a close second. JP.Morgan Wealth management recommends “stress testing” your portfolio to prepare for unexpected issues affecting your retirement. Simulating different scenarios, such as an illness or job loss that forces you into retirement, can help you understand the risks and plan for the potential effects on your savings.

Collecting Social Security Before You Need To

You can collect Social Security retirement benefits at age 62, but claiming before you need to can reduce the total benefits you receive. Full retirement age – the age you can collect your full benefit – is 67 for Americans born in or after 1960. Starting at age 62 reduces that full benefit by 30%. However, delaying it to age 70 increases it by 24%.  The reductions and increases are incremental, totaling a fraction of a percent each month you collect early or delay collecting. But unless you have a shortened life expectancy, you need the money for living expenses or your spouse earns more than you do and can delay filing, Charles Schwab recommends that you wait to claim your benefits.

Investing Too Conservatively

Conventional wisdom says to take fewer investment risks as you reach your 50s and 60s because the closer you are to retirement, the less time you have to recover from market downturns. That’s true, but your retirement age isn’t a hard stop when it comes to your portfolio. Historically, the market has recovered quickly, producing average gains of 2.8% three months after a 10% drawdown, according to State Street Global Advisors. T. Rowe Price recommends keeping 65% to 85% of your portfolio in stocks and the rest in bonds while you’re in your 50s. In your 60s, shoot for 45% to 65% in stocks, 30% to 50% in bonds and up to 10% in cash.

Missing Out on Catch-Up Contributions to Retirement Accounts

Individual retirement accounts and 401(k) plans are important tax-advantaged vehicles for your retirement savings. Although the IRS limits how much you can contribute each year, the limits increase once you reach age 50. Failing to make these catch-up contributions can cost you tens or hundreds of thousands of dollars over the course of your retirement. In 2025, the catch-up limit for IRAs is $1,000 on top of the regular $7,000 contribution limit.  The 401(k) catch-up contribution limit is $7,500 for taxpayers ages 50 to 59, bringing the total contribution limit to $31,000. Taxpayers ages 60 to 63 can make an additional $3,750 catch-up contribution.

Accumulating Debt

Your 50s and 60s can be expensive decades. Even if the money goes to good causes, such as a second home, travel and tuition and weddings for your kids, it can come back to haunt you in retirement. Vanguard recommends leaving low-interest mortgage debt alone if the only other option is to divert money from retirement savings or cash out savings to repay it. As for college loans, if you can’t avoid them entirely, select a loan term that will have the loans repaid before you retire, and consider prioritizing repayment if the rate is higher than you expect to gain on your investments. All other debt should be avoided or repaid before you retire, even if it means working longer to knock it out.

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Daria has over 15 years of experience as a service journalist covering personal finance and other topics. Her work has been featured on GOBankingRates, WSJ Buyside, Fox Business and USA Today. Daria earned a degree in communications from Centenary University, in her home state of New Jersey. She lives on Maryland's Eastern Shore, where she's also a photographer and avid kayaker.

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