Updated: 8/2/2011 3:40 AM ET|
Money in your 50s: 8 moves to make
Accelerate debt repayment
If you're behind on retirement savings, every extra dollar should go there. If you're in good shape, though, you might want to consider getting your debt, including your mortgage, paid off by the time you retire. That will allow you to live on less (or spend more doing fun stuff, such as travel).
That credit card debt should be the first to go. Once you've paid off higher-rate, nondeductible debt, you can start adding a few bucks to every mortgage payment.
Get your kids off the dole
If they're out of school and not disabled, they should be economically independent. If they're still relying on you for sustenance, you're putting their financial future at risk as well as your own.
Some of the saddest letters I get are from elderly parents whose adult children are still hitting them up for cash.
Review your life insurance needs
If you've got minor children or other financial dependents, make sure they'd be adequately covered if you died prematurely.
If the kids are out of college, the mortgage is paid off and your spouse doesn't need your income to survive, you may no longer need insurance. The exception: If you've got a large estate (more than $2 million) and want coverage to help pay future estate taxes. If that's the case, hire an objective professional, such as a fee-only financial planner, to evaluate your options.
Review your other insurance
Your earning power is still one of your greatest assets, and you'll want to protect it with disability insurance if you can. See if your employer offers long-term-disability coverage; if not, check out individual policies.
Also, make sure you have adequate liability insurance. Raise the liability limits on your homeowners and auto insurance policies to the maximum, and consider adding a personal liability policy (also called an umbrella policy). As a rule of thumb, you should have liability coverage that's equal to one to two times your net worth.
Long-term-care insurance is the final piece of the puzzle. There's no consensus about the best time to buy. Insurance agents will insist you should have gotten it in your 40s, while Consumer Reports says most people should wait until they're 65. You should at least begin learning about the options in your 50s, however, and start investigating companies that offer it. You'll want an insurance company with extremely sound ratings, of course; check Weiss Ratings before signing up. You don't want to shovel tens of thousands of dollars into a company that won't be around when you need it.
Schedule all those checkups
Now that you've reached 50, you should be having physicals every year (guys, that means you, too). Women need mammograms every one or two years and should ask about bone-density screenings. Men need prostate exams, and both sexes need to start screening (if they haven't already) for colorectal cancers, which may include sigmoidoscopy or colonoscopy.
This isn't optional anymore, folks. Your risk for cancer and other serious conditions rises as you age; you don't want to hear that you waited too long and that it's too late for treatment.
Join the AARP
Actually, you probably won't need to pay your first year's dues -- because some wag probably will buy you your premiere membership as a gag gift.
Laugh along, then start taking advantage of your AARP discounts on insurance, travel, entertainment, shopping and more.
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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Do NOT join the AARP. They sold out Americans to the socialists!
They support American Values.
I don't get it...
This is my response to the Ozman406's query about his retirement planning:
By my calculation, your collective income is $87,480. Since you currently plan to pay off a $15,000 credit card bill and save an additional $6000 this year, I presume that you only need $66,480 to live on. Assuming your military and disability retirement increase at the same rate as inflation (historically 3%) you should be able to continue to save $21K a year for the next 5 years.
If the annual rate of return on your investments is 8%, then your investments ($15K 401K + $15K DRIPS Utilities + $21K a year) should be worth a total of $177,134 when you turn 60.
At 60, your income will drop because you are quitting the stress-free job. Assuming a 3% increase in salary each year, you quitting that job will decrease you annual income from $101,413 to $65,939. Yet, assuming all things remain the same, you still will need to $77,069 to live on. Your taxable rate on this income will decrease when you quit the stress-free job, but not enough to make up for the shortfall. So will have to dip into your savings. I’m ball-parking that you will need to zero out your savings account over the next 2 years to cover the shortfall.
Assuming your investments/retirement will continue to increase at an annual rate of 8%, then at age 62, your nest egg will total $206,609 . You don’t have the stress free job and you don’t have the $300 a month job. I'm also assuming you move back into your old house so there will be no more rental income. But you also don’t have to pay rent any more (I’m guessing your rent was $700 a month, so it’s a wash). Assuming your salary at the $300 a month job increased 3% a year, your loss in annual income from that job at age 62 will be $4428. Yet your annual living expenses will be to $75,000 (I subtracted the tax savings you will enjoy since you no longer will be working).
Now here comes the sobering part. Let's assume you still have a 20 year mortgage on that house that didn't sell. Let's assume that your annual expenses will remain approximately $75,000 in retirement. Let’s further assume that you realize a 3% annual increase in you military benefits. That means at age 62, your annual military benefits will be $55,197. Finally, let’s assume that you get no social security benefits (they may be supplanted by the military benefits). By my calculation you will run out of money by age 77.
The key question is how much money do you need to live on in retirement. If you can get by on 10% less at retirement than the adjusted rate of what you currently are living on, then you should be able to make it into your 90s without running out of money. Likewise, if you were to hold that stress free job for 2 more years, you could make your retirement last a lot longer.
I hope this helps.
I badly need some advice. I have been working overseas for the past several years. We have saved up to $400k and have a fully paid house which is in use of my 80 years old mother in Toronto. My eldest son - 19 goes to university this year which made me realize that the university education is getting expensive in US/Canada. I have two other kids who would go to university after 5 and 9 years. My wife has a couple of SUBWAY stores which are basically paying off our bills so all my salary can be saved. I have already turned 55 and wondering where to start planning. I was wondering whether buying a rentable property would be a good idea with the saving that we have. Any advice would be greatly appreciated. I am a Canadian national working in the Middle East.
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