EIGHT MONEY MOVES YOU MUST MAKE AT AGE 50
You're not going to live forever, and it's time to get serious
about your future, financial and otherwise.
The good news, for most 50-somethings, is that they're in their
peak earning years. Many (but not all) are done with child-rearing,
which leaves more money in the kitty for other goals, like retirement.
Most are homeowners, and the recent boom years have added nicely
to the typical 50-something's net worth.
But dangers abound. Inadequate savings or high debt levels can
cripple retirement plans, 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. And 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
But what if you hate your job or your industry is downsizing
rapidly? (Think airlines, newspapers and U.S. auto manufacturing.)
You can wait to get fired, or you can figure out what you'd really
like to do when you grow up, and to see if 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 is usually
the 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 (two out of five 50-something households include
minor children), and your folks may need financial help as well.
But saving for your retirement still needs to be your top priority.
You're also close enough to the finish line now -- the median
retirement age these days is 62 -- 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 don't have a specific age or date
in mind, try several different scenarios.
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? Many don't,
and many of those that do are phasing out coverage.
Could you be covered under a spouse's workplace plan?
Would you be eligible for COBRA and/or HIPPAA continuation coverage?
Under the 1986 Consolidated Omnibus Budget Reconciliation Act
(COBRA), you can continue your employer's health insurance coverage
for up to 18 months after you retire, as long as your employer
offers health insurance and employs more than 20 people. You'll
pay for the privilege: You must take over the whole premium (the
portion you've been paying plus what your employer pays) and an
additional 2% administrative charge.
After the 18 months is up, the 1996 Health Insurance Portability
and Accountability Act (HIPAA) guarantees your ability to buy
private individual coverage without facing exclusions for pre-existing
conditions, but again, this could be expensive. Ask your HR department
If you can't get COBRA coverage, you may need to buy an individual
policy. These can be pricey, even if you opt for a high deductible,
and may not be an option if you're in poor health or have a serious
Other factors to consider: Will you sell your home
and move, or 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? Allied
Roth estimates the typical couple at age 65 will need about $200,000
to cover long-term care costs.
You also may want to use more detailed planning software, like
the kind contained in Microsoft Money or Intuit's Quicken, to
help you fine-tune your plan and include variables like inheritances,
different retirement ages (if you're part of a couple) and downsizing
to a smaller house. Consider scheduling a visit with a retirement
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, conversely,
spend more doing fun stuff, like 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're adequately covered if you die 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 (over
$2 million or so) and want coverage to help pay future estate
taxes. If that's the case, hire an objective professional, like
an Allied Roth Retirement Counselor.
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 possibly can.
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
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 60. 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're 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 screening. Men need
prostate exams and both sexes need to start screening (if they
haven't already) for colorectal cancers, which may include sigmoidoscopy
This isn't optional anymore, folks. Your risk for cancer and
other serious conditions is rising as you age; you don't want
to hear that you waited too long and it's too late for treatment.