Your Money, Your Life: If You’re in Your 50s, it’s Not Too Late to Save for

Your Money, Your Life: If You’re in Your 50s, it’s Not Too Late to Save for

15 July, 2007

Are you starting to think about retirement? Do you have enough money to retire now? If not, when will you? Should you start saving - or do you need to save more than you already are?

If you don't know the answers to these questions, now is the time to make a long-term financial projection. Consult with a financial planner or use financial calculators like those found on reacpa.com under "financial resources." Perhaps you need to revise your desired retirement lifestyle. Or, you may need to change your asset allocation to meet your goals. These calculations will help you decide.

Long-term care insurance is another important consideration for 50-somethings. The longer you wait to start a policy, the more expensive it becomes. Also, odds increase that you'll develop a medical condition that will raise premiums or even prevent coverage. If this type of insurance is right for you, now's the time to get a policy.

Haven't Started Saving

If you haven't started putting money away for retirement, don't panic. "It's never too late to plan," said Frank Festi, CPA, CFP, shareholder, Medina office. "The longer you wait, the less benefit you'll see from compounding interest, but you can still make an impact."

Start by determining what income you will have during retirement. This income may be from Social Security, pensions, distributions from IRAs, rent, interest and dividends, just to name a few. You should then attempt to quantify how much will be needed in order to meet anticipated living expenses, Festi explained.

"This analysis will help you determine when you'll be financially able to retire," said Festi. "Don't despair if you discover that your projected future income isn't what you need to maintain your desired retirement lifestyle. The planning process itself will put you in a better position to take control of your financial future."

Caring for Your Parents

Whether you currently take care of your parents or realize that day will soon arrive, what, if anything, should you be doing?

"First, talk to them to assess their financial situation," said Wendy Shick, CPA, CFP, principal, Mentor office. "Be sure to look at assets, liabilities, life insurance, medical insurance, long-term care insurance and taxes. You should also make sure they have considered living wills, durable powers of attorney, durable powers of attorney for health care and trusts."

And, if you parents need help, there are many government programs available to subsidize an aging parent, Festi explained. Make sure you and your parents are familiar with these programs.

"Be careful not to put your parents' financial needs before your own retirement needs, or even your child's education," Festi said.

Helping Your Children

Do you plan to help your children with college expenses? Are there weddings on the horizon? Do you want to help your children with a down payment on a house?

First, you need to realize that you are not legally obligated to do any of these things. Albeit difficult, at important passages in your child's life, you shouldn't cave into feelings of guilt and/or peer pressure.

"You need to think about the number of children you have and the likelihood of being able to able to provide financial assistance to all of them," Shick said. "Establish a reasonable budget for anything you do choose to pay for, communicate the budget to you children and then adhere to it."

Make sure your children actively pursue scholarships and financial aid, too. They will probably be able to secure loans to cover shortfalls, and those loans will be paid back from their future earnings. Prioritize funding your own retirement instead, Festi added.

Even though you may want to help your parents and children, at this stage of your life, it's more important that you have a plan for your retirement. Whether you are building on your existing nest egg or just starting, it's not too late.

What to do with a windfall?

If, as a 50-something, you suddenly come into some extra cash, consider the following:

·Pay any outstanding credit card debt with high interest rates.

·Establish a reasonable nest egg (approximately three month's take-home pay).

• Protect the value of your home by making any necessary repairs that you may have put off.
• Consider investing in a:
  • 401(k) retirement plan
  • IRA
  • 529 education fund for children or grandchildren