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I'm Stephanie Sammons, a CERTIFIED FINANCIAL PLANNER™ and the Founder of Sammons Wealth Management. I help successful women professionals who are in midlife plan for their ideal retirement. Learn more about planning, saving, and investing for your ideal retirement at Sammons Wealth Management.
7 Midlife Money Mistakes that can derail your retirement

When you’re younger, you have a lot more time to make up for your financial mistakes. Once you get into your 40s, 50s, and 60s, it becomes more critical to avoid those mistakes as you age and move toward the retirement phase of your life.

Now retirement can mean different things to different people, and I share more information about the new retirement reality for women in midlife on Episode 9 of the Midlife Money Gal Podcast. I believe more in a work optional retirement lifestyle that is filled with a combination of reinvention, re-education, recreation and relaxation!

I’m also an advocate for balancing your wealth between your life now your future self later. There is always a trade-off here. You want to be engaged and fully living your life today but it’s also important to plan and prepare for your life as you age. It’s a balance.

When you get to that point in life where you may no longer be generating the kind of earnings you can generate today from your work, your savings nest egg and other income resources will need to support you.

Avoiding the midlife money mistakes below can better prepare you for financial sustainability throughout your lifetime. And the good news is, you still have time to correct any mistakes you may be making!

7 Midlife Money Mistakes:

Mistake #1 – Overspending

Overspending is a trap you can fall into when you are in your peak earning years. You are flush with cash, you have all of your basic needs met, and you can probably afford most of the material things and experiences that you’re interested in.

The problem is, you most likely will not remain at this earnings level for the rest of your life. This is a season of life. If you get into the habit of overspending during midlife, it may not be sustainable down the road.

Most midlifers underestimate how much money they’re going to need to generate their same level of income today throughout retirement.

Listen to the podcast episode to hear my tips for adopting a smart spending strategy. I want you to enjoy the things that make you happy today, but it’s a good idea to start getting into the habit of smarter spending. Just because you are earning more doesn’t mean you have to spend more!

Mistake #2 – Under-saving

On the other side of spending is saving, and midlifers aren’t saving enough either. While you are generating that higher income now during your peak earning years, it’s also the best time to be socking away money into savings.

I recommend when you are over 40 that you should strive to save 20% of your income each year at a minimum. Also, if you receive bonuses through your work, consider saving at least half of your bonus for your future and spend the other half on something that brings you joy today.

If you receive an inheritance, I suggest saving as much of it as possible as it can truly put you ahead of the curve with your retirement nest egg.

The goal is to have a balanced approach. Sure, it’s okay to splurge from time to time if you can afford to do so. Just be disciplined with your savings and take care of your future self first!

Mistake #3 – Paying Too Much in Taxes

In order to minimize your taxes, prioritize where your savings dollars are going. For example, do you have a company match within your 401k at work? Take advantage of that ‘free’ money first and foremost.

Also, consider maximizing your contributions to tax-deductible retirement plans like 401ks or other small business retirement plans if you’re a business owner. Determine if you are eligible to take advantage of tax-free accounts such as an HSA (Health Savings Account) or Roth IRA as well.

Once you have the tax-deductible and tax-free account bases covered, you can save any leftover dollars into a taxable account.

Each of these types of accounts can grow over time into a healthy retirement nest egg while also minimizing your tax impact today and tomorrow.

Mistake #4 – Relying on Social Security and Medicare

Social Security and Medicare are supplemental benefits, they are not full benefits. Do not make the mistake of relying on these benefits to cover the bulk of your income and healthcare needs later in life.

Both of these plans are under scrutiny today and I do believe that change is inevitable. Health care costs per couple are estimated to be $250,000 in retirement, and that doesn’t include long-term care or dental costs.

These government benefits will help some if they are still around in full force when you become eligible, but it is mostly going to be your responsibility to fund your retirement lifestyle and healthcare expenses.

Mistake #5 – Investing too Conservatively or Aggressively

Investing too conservatively or aggressively can cause problems for your retirement nest egg down the road. Each is an extreme that carries risk.

If you’re invested too conservatively, your investment portfolio won’t outpace inflation which can erode the purchasing power of your dollars.

On the other hand, if you’re invested too aggressively you may end up with occasional losses in your portfolio that take years just get back to even.

Instead, you want to avoid the extremes and aim for consistent, level returns in your portfolio when you are in midlife. There is no reason to swing for the fences and take more risk than necessary to achieve your long-term financial and lifestyle goals.

Saving more is also a great way to forcefully impact your future financial lifestyle! (see #2)

Mistake #6 – Taking on too Many Family Financial Obligations

Family is important, and I’ll be the first one to say that taking care of family is something that I value. Whether it is our parents, siblings, or even the kids who may come back and live with us after college, there are just times when family members need our help financially.

What I want you to be cautious about here is giving too much of your own wealth away when it may not be necessary. You don’t want to get to a point where your situation then requires a family member to take care of you financially!

The best thing you can do here is evaluate all of your options, give in other ways that don’t involve money, and set limits if necessary. Make sure you don’t get caught in the trap of enabling family members with money.

Mistake #7 – Falling for Get Rich Quick Schemes

If I had a dollar for every get rich quick scheme I’ve come across in my 20+ years as a financial advisor, I’d be rich! Ha ha.

I’m not talking about investing in yourself or your own business here. What I’m referring to is those fly-by-night ideas that you hear about from friends and in laws, or even in the media.

By the time you hear about these get rich quick ideas, it’s almost always too late. These kinds of scams also greatly impact the elderly, so make sure your parents don’t fall prey to them!

Take care of your wealth. The best way to grow your wealth is to protect it. Before you invest in anything, do your research and thoroughly kick the tires. And remember, if it sounds too good to be true, it is.

I hope these tips can help you avoid the common midlife money mistakes.

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