How to Invest in Your 50's

by Charlotte Johnson

For many people, reaching their 50s means greater opportunities to prepare for retirement. The children are out of the house and men and women have reached a higher earning potential than ever before. Even if you don't have freely flowing finances, it is wise to invest money while you're in your 50s. Smart investing during this important decade can help you reap rewards for a comfortable retirement.

1. Continue contributing to your 401k if you have one. Add extra money if possible, especially if your employer is matching a percentage of your contributions, as this is essentially free money. You are currently allowed to contribute up to $22,000 per year to a 401k plan.

2. Contribute to your IRA. You are allowed to contribute up to $6,000 per year if you are 50 or older -- the limits for everyone else is $5,000 for 2011. If you haven't added much money to your IRA in the past, now is the time to catch up as much as possible.

3. Invest in an annuity. This type of investment allows you to contribute a single lump sum or a series of tax-deferred contributions. Annuities then offer the option of receiving regular payments over the course of your lifetime once you begin withdrawing money.

4. Invest in bonds. Government and corporate bonds generally offer more return for your money than certificates of deposit, savings accounts or money market accounts. At the same time, they aren't as risky as stocks.

5. Diversify your investments. Having a range of investment outlets such as bonds, CDs, annuities and a 401k account will spread out your investment risks. As the saying goes, don't put all of your eggs in a single basket. Also, the closer you get to retirement age, the less aggressive your investment strategy should be because of your shrinking investing time horizon. While young people can afford to take risks with their money because they will have the time to recoup any losses, it's important to lower your risk as you approach retirement.

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