Financial Management By The Decade – The 50’s
Welcome to age 50. Are you prepared? Turning 50 is a milestone for many reasons. Children are grown, the big debts such as saving for university and the mortgage, should be making less of a dent, and you are reaching your peak earning years.
You now realize that your target retirement age is in sight, and it’s not that far away. As you get older, time seems to move faster as well.
It’s time to crunch some numbers
The five to ten years before you leave the workforce is a critical period. It’s time to start figuring out your resources in earnest while you still have time to make adjustments.
With many of the larger expenses hopefully behind you or winding down, it’s time to do some serious number crunching and figure out what it’s going to take to live comfortably.
Get a ballpark figure in today’s dollars of what you will need and what income you’ll expect. This figure gives you direction as you save, invest and create your own financial plan.
24% expect their home to be their primary source of retirement income
If you are a couple, make sure your retirement goals are compatible. 68% of people in this age group have yet to discuss their desired future, post-career lifestyle with their spouses (RBC).
Pay off your mortgage and other debts as soon as possible. Help your kids get a good education, then get them financially independent.
Watch out for the unexpected
Unfortunately, unexpected financial crises are far more common than anticipated.
According to the Ontario Securities Commission, a whopping two-thirds of people over 50 have experienced at least one major life-changing event that challenged their financial plans:
- Giving financial support to an adult family member who is having difficulties.
- Significant health care expenses/long-term disability.
- Forced early retirement, either the result of health issues or due to company downsizing.
- Losing money in the stock market and not making it back.
- Unexpected home repair bills.
These major life events can have a dramatic affect on a family’s financial plan. They can cause not only loss of income, but brings the ability to save to a standstill.
Additional unplanned spending leads to premature withdrawal of savings.
Suddenly single
The average age of widowhood for women in Canada is 56. The financial impact of suddenly becoming single due to the death of a spouse can be substantial – income stops but the expenses continue to come in. Depending on the deceased spouse’s responsibilities in the home, the loss will require significant adjustments. This underscores the need for personal life insurance and knowledge of the family investment and financial plan.
Becoming unexpectedly single can also occur when a relationship ends due to divorce. In Canada, the only age group that is seeing a rise in divorce rates are couples over 50. A divorce could result in each of the ex-spouses and their children having a lower standard of living than they previously enjoyed. 43% of Canadian women had a substantial decrease in household income.
70% of BMO survey respondents said they would be unprepared financially to withstand a divorce or separation.
Consider long-term care insurance
The great unknown of retirement is future medical and health care costs. There is a very real possibility of needing long-term care. If you remain healthy – that’s great. But, any chronic condition can turn into an ongoing expense that can greatly restrict your lifestyle.
Buying long-term care insurance while you’re healthy is easier at age 50. If you wait until you are older you might discover that the annual premium cost is substantially higher, or you’ve developed a preexisting condition that disqualifies you from coverage.
Invest for the decades to come
It’s easy to see age 65 as the “finish line,” but the fact is you are likely to live at least an additional 20 plus years. At this age you understand the importance of avoiding bad money choices as your retirement nears.
Moving towards more conservative investments makes sense as you get older, but don’t overdo it. If you are 50 today, that’s 35 years of market fluctuations, plus inflation.
As you review your savings goals be careful not to set the bar too low, but avoid the temptation to plunge into riskier investments, especially if you’ve had a late start.
Pay more attention to your investments and assess for tax efficiency and associated fees.
45% have saved less than $100,000
Ramp up your savings. Redirect money from your mortgage and kids to your savings. Try for at least 25 to 40% of your gross income.
Financial takeaway for your fifties – Focus on your retirement nest egg.
Also read:
- Financial management by the decade – Teen years
- Financial management by the decade – The 20’s
- Financial management by the decade – The 30’s
- Financial management by the decade – The 40’s
Dear Marie
Your statement “The average age of widowhood for women in Canada is 56” seems unlikely to be true. The average age at marriage is about 31 for men and 29 for women, and the average life expectancy is 84 for women and 80 for men. How could the average age at widowhood be 56? What is your source for your figure?
Ron Sigal
@Ron Sigal. The figure comes from a BMO Wealth Institute report on financial planning for older Canadians. The average age of 56 for widowhood was taken from Statistics Canada, Women in Canada – A Gender-based Statistical report.
Two points I’d like to make here.
1. Your average age of marriage is for recent times and, really has no bearing on whether someone will become widowed.
2. Life expectancy you stated is for today’s newborn.
Dear Marie
I looked up the Statistics Canada report “Statistics Canada, Women in Canada – A Gender-based Statistical report” that you cited in your response. I did not find anything within this report suggesting that the average age at widowhood is 56.
Ron Sigal
A clarification: A quick google search revealed numerous financial blogs and a few newspaper articles asserting that 56 is the average age of widowhood “according to the Canadian census”, so you are not the first to do so. However, at the Statistics Canada website, which would house all reports on the Canadian census, a search for the words “age of widowhood” revealed no results. I suspect the alleged “age of 56” may not have any basis in fact. I would be very interested if you can find a primary source (e.g. a journal article or Statistics Canada report analyzing census data) for the alleged average age of widowhood being 56.
Hi Ron, here is the 378 page Stats Can report on Women in Canada: http://www.statcan.gc.ca/pub/89-503-x/89-503-x2010001-eng.pdf
I didn’t comb through it in great detail, and I couldn’t find the exact quote, but there were a few references – including these charts showing the percentage of population by gender who live alone http://screencast.com/t/li8LulAwFP0S – and the number of couples by age and gender – http://screencast.com/t/g0ZMkhxr4gM4
Dear Marie
I did go through this entire report and there is no statement or chart in it suggesting that the average age of widowhood is 56.
Ron
Dear Ron. I am not a statistician and I leave others to interpret data. On page 325 of the report there is a chart that shows couples by age group and sex that clearly shows that for age groups 45-49 and up the percentage of women who are no longer part of a couple. It has then been interpreted that the average age is about 56.
Marie and Rob, I have a Master of Public Health degree in Quantitative methods, and I am qualified to interpret this graph. This graph provides absolutely no support for the assertion that the average age at widowhood is 56. On the contrary; at age 55-59 the graph on page 325 of this report indicates that over 70% of women and close to 80% of men are in couples. The proportion of women who are in a couple does not drop below 50% until age 75 to 79. Among men, even at age 80 and over, more than 65% are in a couple, likely due to the fact that men tend to marry women slightly younger than themselves and tend not to live as long as women.
CANISM Table 102-0505 can provide a bit of information on the average age of widowhood (http://www5.statcan.gc.ca/cansim/a26). It shows the age bracket of married men who died for each year from 1991 to 2012.
If we assume that each person is on the low end of each bracket (i.e. all 65 to 74 year olds are 65) you get the average age of the newly widowed was 63.5 in 1991 and increased to 68.8 in 2012. If you assume that each person is in the middle of their bracket (i.e. all 65 to 74 year olds are 69.5) you get the average age of the newly widowed was 69.1 in 1991 and increased to 73.3 in 2012.
This isn’t perfect as it includes people who enter widowhood multiple times and are therefore more likely to be older. However, 56 seems to be extremely implausible. I suspect the 56 number came about by asking all current widows what age they became widowed. This skews the number as younger widows are more likely to have a higher remaining life expectancy than an older widow and therefore would be over-represented. Also, for people who have been widowed a long time it wouldn’t reflect the improved life expectancy that’s occurred since their husband’s death.
W, the estimate of 73.3 as the average age of widowhood, based on the assumption that the average person is aged at the midpoint of a 5-year age range as described by you above, seems quite plausible to me.
This is old data but just for discussion sake it should be fairly relevant? Ron your probably 100% correct here, but maybe focusing on the message to be prepared for some kind of income changing event late in life or just before retirement, rather than the exact age it occurs may suffice here?
In the United States in 1998, there were nearly 13,600,000 widowed persons (U.S. Bureau of the Census web site). Widows and widowers represent almost seven percent of the American population aged 18 and older (although approximately 5,000 widowed persons are under age 18). But widowhood is highly age-linked, of course; virtually one-third (actually 32.5 percent) of the population age sixty-five and older consists of widowed persons. And this estimate is at a single point in time, meaning that a relatively small number of widowed persons who have remarried, and a much larger number of persons who are currently married but will be widowed in the future, are not counted as widowed. Widowhood is a very common experience in the life cycle of contemporary Americans, as it is in other societies as well.
Widowhood is strongly connected to gender. In 1998, the latest year for which data are currently available, 2.7 percent of all men aged 18 and older, and 14.9 percent of all men age sixty-five and older and were widowed. For women, 10.8 percent of those 18 and over and 45.2 percent of those sixty-five and over were widowed. The percentage widowed rises dramatically with age for both sexes, but there is a remarkable sex difference even among the oldest: 42.0 percent of men 85 and over, and 77.4 percent of women in that age category, were widowed as of 1998 (U.S. Bureau of the Census web site).
I agree completely that it is important to have a tentative plan for what one would do if a spouse died. While the average age at which a spouse dies is much older than 56, it is still possible for such a calamity to happen suddenly at any age, e.g. in a car accident, long before one would expect it to happen. Many couples may divide responsibilities such that one partner takes care of all financial matters and the other takes care of all household maintenance. This can be problematic if one partner dies unexpectedly and the surviving partner knows absolutely nothing about the dead partner’s former domains of responsibility. In fact, the Boomer and Echo blog had an article on this issue not long ago.
Personally I think those numbers are going to decrease as statistics for cancer alone are startling never mind which gender or other health issues. I know far too many “young” people who widow/widowerhood is happening to. My healthy husband at age 53 was diagnosed with a brain tumour. No bad health habits other than overweight. Never smoked in his life. One cell gone bad is how it was explained to us. It’s happening to homes like ours across the country. Be prepared people!!
From Canada Census 2011 age cohorts and marital status widowed. Average using cohort midpoints is 74.501yrs, median cohort is 75-79 and the modal class is 80-84. Derived from 98-312-XCB2011039 table.
Be prepared but don’t be fearful!