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Your 50s can be a tricky decade.

People in their 50s are usually in their peak earning years, and more than half no longer have kids at home. They're paying down debt, and their wealth tends to be higher than it was a decade earlier.


The median income for households headed by people in their 50s was just under $64,000 in 2007, according to the Federal Reserve Survey of Consumer Finances. Median net worth was $229,300, up from $133,100 for people in their 40s.

Although 85% of 50-something households reported owing money, the median amount was just more than $85,000, compared with nearly $100,000 for those in their 40s and $110,000 for those in their 30s.

Less than 4% of 50-something households had a negative net worth, compared with 6.3% of households headed by those in their 40s and 11.5% of those in their 30s. Only 5% of 50-somethings were 60 days or more late on a bill, compared with a peak of 9% for households headed by 30-somethings.

Liz Weston

Liz Weston

Of course, dangers abound. Sharp losses in retirement funds and home equity in recent years have many in their 50s worried about the future. High debt levels still can cripple finances, as can illness, disability or layoffs. Poor planning, insufficient insurance protection and boomerang kids (adult children who return to live at home) pose additional risks.

By making some crucial decisions now about timing your retirement or where you might live, you'll be better able to map out your plans.

If you want to get yourself in the best financial shape possible at this milestone, take the following steps:

Reconsider your career

Most baby boomers say they want to work at least part time in retirement. Work can have social, emotional and especially economic benefits: The longer you're employed, the less you need to save for retirement.

But what if you hate your job or your industry is downsizing rapidly? (Think newspapers and retailers, for instance.) You can wait to get fired, or you can figure out what you'd really like to do when you grow up -- and see whether you can get there from here. A session with a career counselor could help; so could that venerable career changer's guide, Richard Nelson Bolles' "What Color Is Your Parachute?"

Beware the temptation to pitch it all and go back to school for years on borrowed money, however. You're unlikely to recoup the investment, and you could end up saddled with student loans in your 80s.

If you need additional training, night school -- paid for out of your current income or via federal student loans -- is usually a better bet. If you're dying to start your own business, do it as a sideline first to see if you can make your idea fly.

Put retirement on the front burner

Sure, you've got other obligations. You may still have kids to raise and educate (45% households headed by 50-somethings include minor children), and your folks may need financial help as well.

But saving for your retirement still needs to be your priority. Those trashed retirement accounts need to be rebuilt -- and rebalanced so that you're not taking too much or too little risk.

You're also close enough to the finish line now that you should begin to make definite plans about where you'll live, what you'll do and how much money you'll spend.

If you're thinking about retiring before age 65, when Medicare coverage kicks in, consider your health insurance options. Does your company offer retiree medical coverage? Could you be covered under a spouse's workplace plan? Would you be eligible for COBRA and/or HIPAA continuation coverage?

Other factors to consider: Will you sell your home and move? Will you tap the equity with a reverse mortgage? How will you spend your time, and how much will it cost? (Golf and travel can be expensive pastimes.) Do you have long-term-care coverage, or will you need to set aside money to cover future care? The Center for Retirement Research at Boston College estimates the typical couple at age 65 will need about $197,000 to cover out-of-pocket medical costs.

You also may want to use more-detailed planning software, like the kind contained in Intuit's Quicken, to help you fine-tune your plan and include variables such as inheritances, different retirement ages (if you're part of a couple) and downsizing to a smaller house. Consider scheduling a visit with a fee-only financial planner to get a second opinion. You can get referrals from the National Association of Personal Financial Advisors or the Garrett Planning Network.