28 Keys to Building Wealth — Even in Your 50s

Editor's Note: This story originally appeared on NewRetirement.

To build wealth, many people think you need a Wall Street job, good luck or just to be born into advantageous circumstances. Those things definitely help, but building wealth can happen by following a few best practices and habits consistently.

You can even begin building wealth in your 50s. That is definitely not too late.

Want to know how to build wealth? Make sure you are following at least some of the following tips.

1. Don’t let regret rule your future

People often wish they had started investing at a younger age, or that they wish they’d invested more when they were younger. Frankly, they wish they had done a lot of things differently.

A common mistake is to let those feelings of regret prevent you from taking the best action in the present.

We all do it in some area of our lives. What’s the best way to deal with the regret? Start today with that thing you wish you’d done in the past.

Don’t let your regret rule your future.

2. It is never too late to build wealth

It is not unheard of for people to become millionaires after they retire.

And, the average age when people become millionaires is 58.5 for women and 59.3 for men according to a report from Fidelity Investments.

Don’t ever think it is too late.

3. Invest regularly and appropriately

It is not enough to save money; you need your savings to go to work for you by investing those funds. This statistic may surprise you, but Americans hold 58% of their investable assets in cash. That is not the best idea.

Let’s say you’re 45 and haven’t yet saved enough for retirement. What can you do?

• Start investing $500 a month today.
• Allocate 80% of that to an S&P 500 index fund and 20% to a U.S. Treasury bond fund.
• Assume a 6% average annual return.

If you started with zero at 45, by age 65 you will have $226,719, or about $20,000 a year to live on until you’re 85, if you keep earning the same returns.

It’s not ideal, but it’s a lot better than $0 a year.

4. Play catch up

Catch-up contributions are the IRS’s way of making it easier for savers age 50 and up to tuck away enough retirement savings.

You probably already know that there’s a limit to how much you’re allowed to save in tax-advantaged retirement accounts such as IRAs and 401(k) plans.

Well, once you reach age 50, you’re allowed to make additional “catch up” contributions over and above those annual contribution limits.

5. Learn and keep learning

Bill Gates, one of the absolute wealthiest people in the world, is famous for carrying around a tote bag full of books. He is obsessed with reading and learning.

Thomas Corley, author of “Rich Habits: The Daily Success Habits of Wealthy Individuals,” reports that 86% of rich people say that they “love reading” while only 26% of poor people agree with that sentiment. Corley also found that wealthy people love, in particular, to read about self-improvement.

Learning about personal finance — and perhaps a wide variety of other topics — is key to building wealth.

6. Find an advantage, play by your own rules

Views about how to build and achieve wealth have changed over the last few years.

According to Pew Research, a growing majority (65%) of Americans say that the main reason people are rich is because they possess more advantages than other people — not because they work harder than other people.

So, what are you to do if you weren’t born into wealth and opportunity? Well, being aware of the issue is helpful. And perhaps you can reframe your definition of an advantage. Find something in your own circumstances, skills and strengths, and exploit it.

You don’t have to play by all of the existing rules. People who build wealth often take an outsider perspective and do what other people aren’t doing.

7. Set goals

Research indicates that setting goals fundamentally alters the structure of your brain, making it more likely that you will behave in ways to achieve what you want.

If you want to build wealth, make it a goal.

And, don’t be afraid to set really big goals. Another study found that setting a particularly challenging goal alters your brain structure more quickly and effectively than small goals.

Once you have figured out your goals, write them down. A 2015 study by psychologist Gail Matthews found that when people wrote down their goals, they were 33% more successful in achieving them than those who formulated outcomes in their heads.

8. Develop and maintain a long-term financial plan

Developing and maintaining a long-term financial plan is a really important aspect of setting and achieving goals.

The NewRetirement Planner allows you to create a detailed and reliable plan. It helps you imagine the future you want and discover ways to achieve your goals. It’s a free way to get a written plan in 30 minutes or less.

9. Remember that time is money (and money is time)

Every hour you have could be spent making money. And the more money you make, the earlier you can retire to free time.

To build wealth, you want to think about the trade-offs between your time and earning money.

Think about how much you can earn with each hour, how much you lose when engaged in tasks that don’t produce money. And think about what you want to do with your time.

10. Wake up early

Being happier, healthier and wealthier are all benefits of waking up earlier.

The early bird really does get the worm, according to biologist Christoph Randler, whose research found that people whose performance peaks in the morning are better positioned for career success.

11. Invest your bonus

It is a bonus. That means that, in theory, it was not expected.

If it wasn’t expected, then you shouldn’t really need to spend that money.

So, what should you do? Sock it into your retirement savings!

12. Don’t borrow from your 401(k)

To save as much money into your retirement accounts as possible, you don’t want to borrow from those accounts.

Building wealth means that you need to let your savings earn returns and grow. Don’t borrow from that money. Explore other sources of emergency funding.

13. Watch college expenditures

Whether you are still paying off your own student loans or figuring out how to pay for your children’s college education, education expenditures are tricky.

It can be difficult to say no to your children, and you don’t want to saddle them with student loan debt. However, you need to prioritize retirement savings.

Learn more about how to fund a college education when you are trying to build wealth and retire.

14. Careful caring for your own parents

Caring for aging parents can trigger people to retire early and engage in caretaking full time or spend their retirement savings to help pay for hired help.

If you are considering either of these options, think carefully about your own needs for retirement security.

15. Own a home and, if possible, own someone else’s home

You probably know that owning your home is among the best ways to build long-term wealth.

If you have already accomplished that goal, then it might be time to own someone else’s home. Owning investment property can build wealth and provide income.

Here are “8 Ways to Invest in Real Estate for Retirement.”

16. Quit your day job — go out on your own

Building wealth requires hard work, but that doesn’t mean you have to keep your nose to the grindstone, toiling away for someone else.

Depending on your experience and risk tolerance, you may be able to quit your job and start your own business — and hopefully increase your wealth in the process.

Check out these surprising facts about entrepreneurship and success later in life. (Here is one to get you started: Most entrepreneurs worldwide are over 55.) And here are “12 Business Ideas for the Over 50s.”

17. Minimize investment fees

We can’t control how the market performs, but we can control our investment fees. Index funds and exchange-traded funds make it possible to pay almost nothing when you manage your own investments online.

Even among inherently low-cost funds, you can minimize your fees by choosing the right brokerage to invest through. Vanguard’s average index fund expense ratio is just 0.07% compared with an industry average of 0.23%.

That difference might seem insignificant. It’s not.

Say you start with nothing and invest $10,000 a year over 25 years and earn a 6% average annual return. The 0.23% expense ratio will cost you an extra $12,068.

18. Don’t try to time the market

There will always be people who look like geniuses for buying or selling an investment at what later turns out to be a pivotal moment. But those people were just guessing when they made those choices, and they got lucky.

Here’s what happens when they get unlucky.

Let’s say you bought 100 shares of an S&P 500 index fund (specifically, FXAIX) on Dec. 31, 2019, for $11,200. On March 11, when the World Health Organization announced a global pandemic, you sold all 100 shares for $9,541, losing $1,659.

About two weeks later, on March 23, you feel relieved that you minimized your losses. Stocks have gone down further. Your investment would be worth only $7,793 if you still had it.

By June 23, you were ready to jump back in. You had to pay $10,900 for 100 shares.

Now you’re back where you started in terms of your investment holdings, but you’re $1,659 poorer. This example shows why avoiding “market timing” is so important.

Experts recommend that you have, live by and maintain an Investment Policy Statement to help you make better decisions about your investments.

19. Live within your means and avoid debt

Tracking your spending for a month and comparing it with your income is a good way to make sure you’re living within your means.

Tracking your spending year-round will give you a better idea, especially if your expenses and income fluctuate.

When you take on debt to overspend, you pay interest — the opposite of what you need to do for long-term financial security, which is to earn interest.

20. Try drastically reducing expenses

To build wealth, drastically reducing your expenses can be a great idea. Downsizing your home can be the best way to make a big dent in what you spend.

21. Minimize taxes (legally)

You may not think of taxes as a monthly expense if your employer withholds the money from your paycheck and you never see it.

But they are, and keeping what you earn is essential to building wealth.

Learning about which tax breaks apply to you and how to claim them, as well as strategies to make yourself eligible for them, is a habit of the wealthy that all of us can follow.

Learn more in “Retirement Planning and Your Taxes: Big List of Tips for Keeping More of Your Own Money.”

22. Build and maintain relationships

The relationships we build through social clubs, meet-up groups, work and community are inherently worthwhile. They’re fun, they help us feel connected and they even boost our mental and physical health.

Better health means lower health care spending. And when you build genuine friendships, you’ll have a network of people who want to help you if you fall on hard times. You’ll enrich your life.

Furthermore, your network can help you build wealth. Thomas Corley, author of “Rich Habits,” found that 79% of wealthy people spend at least five hours networking each month, while only 16% of poor people devote time to these types of social connections.

23. Practice optimism, but beware of optimism bias

Harvard Medical School says that an optimistic outlook improves our overall health and longevity. Longevity is not always good for your finances, but health certainly is.

That said, optimism can lead investors to overestimate their own knowledge and make foolish decisions. We should not think of ourselves as above-average individuals who can outperform or time the market, for example.

Explore 16 other lessons from behavioral finance that can help you have a more secure future.

24. Get enough sleep

When you get enough sleep every night, you may:

• Make better decisions.
• Enjoy better health.
• Be less susceptible to accidents.
• Work more effectively.

You’re more likely to perform your best in every aspect of your life when you’re well-rested. Improved performance is a means to both earning more and spending less.

25. Maintain an emergency fund

According to Bankrate, 53% of Americans have less than a three-month supply of emergency savings, with 28% having none. And this was before the pandemic.

So, where does the money come from when the unexpected happens? More than likely, it comes from the retirement fund. And that’s a risky game to play.

Tapping retirement savings can impair your ability to build wealth. You need that money to earn returns for your future.

In a pickle? Explore the best (and worst) sources of emergency money.

26. Delay Social Security

The longer you wait to start claiming Social Security, the more money you will earn over your lifetime.

As a general rule of thumb:

• Don’t take Social Security at 62, unless you have a very short life expectancy due to illness.
• If you think that you’ll pass away before 80, then start taking it at your full retirement age, between 65 and 67.
• If you think that you’ll live beyond 85, then wait until 70.

Test different Social Security claiming strategies and see what works best.

27. Get help (fixed fee help)

According to the Fidelity survey mentioned earlier, two-thirds of all millionaires work with a financial adviser. Getting a second opinion and outside advice is proven to help you build wealth.

However, you probably want to pay for that help. Using a fixed-fee adviser, rather than one who works on commissions, is a good idea.

28. Don’t retire

According to Gallup, the average age of retirement is 61. However, wealthy people say they don’t plan to retire until they are at least 70. And it turns out that they aren’t working for the money. They keep working because they enjoy their work.

Maybe enjoying your work is the real secret to building wealth!