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.
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.