7 Smart Moves To Build Wealth After 50

It’s never too late to build wealth. But if you feel financially behind your peers at age 50, there are ways to catch up — or even get ahead. And doing so doesn't necessarily require you to have a six-figure salary.

However, it does require discipline, and the willingness to stick to your plan.

The Midlife Advantage

If you’re starting to build wealth at age 50, you might have a few advantages over younger savers. People in their fifties tend to have more experience and may therefore have better discipline, and they’re often in their peak earning years.

At this age, you’re likely to have fewer dependents, as children may have grown up and moved out of the house. Even if you still have to budget for dependents, you can capitalize on special tax breaks and catch-up contributions. People who are age 50 or older can contribute an additional amount of money per year to their 401(k) plan and individual retirement account (IRA), which offer tax advantages. That extra amount is determined each year by the IRS.

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Smart Moves That Compound Quickly

Making the right money moves now and staying disciplined can help you grow your portfolio. These are some of the best ways to build your nest egg:

1. Pay off high-interest debt: Get rid of high-interest debt, such as credit card debt, to free you from a significant expense. You can then put more money into your portfolio.
2. Capitalize on catch-up contributions: Maxing out your 401(k) and IRA plans and using catch-up contributions can help you get additional tax advantages.
3. Let your money compound: The more money you put into an asset, the more time it has to grow. If you invest $10,000 into an index fund that grows at 10% per year and never touch it, you will have roughly $26,000 in 10 years. The more you invest, the more your money compounds.
4. Diversify your income: Picking up a side hustle will let you boost your savings and get out of debt sooner.
5. Automate your investments: Setting up automatic transfers from your savings account to your investment accounts means you don’t need to remember to move the money regularly.
6. Create a budget: Monitor how you spend money and look for ways to cut expenses without reducing the quality of your life.
7. Set goals: Having short- and long-term financial goals can help you build a bigger nest egg. Focus your goals around actions you can control, such as what percentage of your income you want to invest.

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Avoiding the Common Pitfalls

When building wealth, try to avoid common mistakes. For example, when investing in stocks and funds, try to only invest in assets you plan to hold for several years. This mentality can help you avoid panic selling during a correction or chasing trends. You probably won’t retire at 51 if you are getting started at 50, but retiring at 60 or 70 is more realistic with the right plan.

It’s also best to not chase trends, like investing a large portion of your money into risky, growth-oriented assets without fundamentals to support them. And when you are calculating how much you need in retirement, make sure you include healthcare costs, which are often underestimated.

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The Mindset Shift

When building wealth, it's unlikely that you’ll see life-changing results immediately. But the gradual compounding will snowball.

Focus on making steady progress and investing money each month, and maximize your retirement accounts. If you continue to apply good money habits, your portfolio has a better chance of being where it needs to be by the time you want to retire.