with me! The best is yet to be.”
—ROBERT BROWNING
I’m Too Young for That
When Jan found a copy of AARP The Magazine in her mailbox, she thought there was some mistake. Maybe it was intended for her mother? Or, perhaps this was her husband’s idea of a birthday joke, since she had just celebrated her 50th. But no, the publication geared toward seniors was addressed to her. How can I be old enough to be a “senior?” thought Jan, when she was still working full-time and attending her son’s high school football games. Like Jan, many people don’t consider themselves to be senior citizens in their 50s—and they certainly don’t feel old.
In 2014, the last of the baby boomers will reach age 50, officially putting this large segment of Americans, born between 1946 and 1964, in their senior years. Life expectancy has increased by an average of 12 years since the first boomers were born, along with “health expectancy” or number of years we can expect to live without health problems or disabilities—which begs the question: What will we do with this extra decade or more of life?
Some might say 50 is the new 40. A majority of those in their 50s are still engrossed in careers, with no immediate plans for retiring. And because people are waiting longer to start families, a large number still have school-aged children at home during this decade. Another sizeable segment of this group known as the sandwich generation is raising children and caring for elderly parents. All of which means that instead of slowing down, many 50-somethings are busier than ever. Thankfully, a good portion of those in their 50s are healthy and active enough to keep up with these demands.
However, at 50, issues that once seemed distant are now visible on the horizon. If you haven’t already made plans for retirement or spent time thinking about end-of-life issues, there is no time like the present—whether you are in a position to have important conversations with elderly parents regarding their affairs or contemplating your own wishes. In fact, the decisions and plans we make in our 50s will set the stage for our senior years.
Novelist and dramatist Victor Hugo once said, “Forty is the old age of youth; fifty is the youth of old age.” As we embark on our senior years, we should take advantage of this “youthfulness” to plan for late life.
Money Matters
Despite our best intentions, many Americans don’t get serious about saving for retirement until midlife or later. At that point, some people may begin to panic when they read the amount experts say they “should” have saved by this age. It’s easy to get discouraged and even adopt a “why bother” attitude. However, it’s not too late, and doing something is always better than doing nothing. If you’ve been saving and investing for retirement, now is the time to make assessments and possibly step up your efforts. If you haven’t begun the process, start by taking small, manageable steps. Financial experts recommend laying out a road map for retirement that includes the following:
• Run projections using a retirement calculator (available online), which can give you a broad overview. Don’t forget to estimate future healthcare costs, particularly if you are planning to retire before Medicare age.
• Sit down with a financial planner (if you haven’t done so already) and create a financial inventory. Then project when you want to retire, keeping in mind there is nothing magic about ages 62 or 65, and see if you are on target to meet your financial needs. The average family requires 70 to 90 percent of preretirement income, but this amount varies with individual situations.
• Refinance your mortgage to pay it off sooner, if possible.
• Get a handle on spending. The best way to save is to spend less. Create a retirement budget worksheet that includes regular contributions to your retirement savings.
• Maximize your retirement contributions. In recent years, the allowable contribution amounts for both 401(k) accounts and individual retirement accounts (IRAs) were raised. In 2014, an employee age 50 and older can now contribute up to $23,000 annually into a 401(k) account, and an additional $6,500 into an IRA.
• Educate yourself. Understand your investment options, attend seminars, and read books on the subject. Take advantage of free retirement planning seminars offered by financial advisors and community centers.
• Focus on your career. Your earning power is one of your biggest assets, so don’t be too quick to give it up. It may mean switching careers.
• Evaluate your investments. Shift your investment focus to strategies that help maximize lifetime income and reduce risk.
• Evaluate your insurance needs, including life, disability, and long-term care insurance. The best time to purchase this type of insurance is when you are healthy.
“It’s also important to note that at age 50, employees who participate in certain qualified retirement plans are able to begin making annual ‘catch-up’ contributions in addition to their normal contributions,” says Michael Johnson, Certified Financial Planner® (CFP®), CPWA®. “Those who participate in 401(k), 403(b), and 457 plans can add an additional $5,500 per year, while those in simple IRA or simple 401(k) plans can make a catch-up contribution of up to $2,500. And, finally, those who participate in traditional IRAs can set aside an additional $1,000 a year. It’s a good way to jump start your retirement savings.”
When it comes to financial planning, another milestone to consider is age 59½; that’s when you are able to start making withdrawals from some qualified retirement plans without incurring a 10 percent tax penalty. To find out if this applies to your particular plan, as well as whether it makes good economic sense to begin making these withdrawals, you should consult with your financial planner.
It seemed like only yesterday when Kate was sitting in front of her adolescent daughter, who was squirming uncomfortably in her seat, having “the talk.” Now, here she was years later, having an equally difficult conversation with her adult daughter, who was once again squirming in her seat. This time, the topic was end-of-life wishes.
Despite her daughter’s discomfort, Kate forged ahead because she understood the importance of broaching this sensitive subject. Kate, who was also caring for her elderly father, knew from experience that the time to have this discussion was when she was healthy. After her dad had suddenly suffered a debilitating stroke, Kate and her sister were left with some very difficult decisions and no direction.
“My dad didn’t believe in talking about things,” lamented Kate. “He had no plans or instructions, which made the situation very hard for us. I vowed that I wouldn’t put my own kids through that kind of stress.”
Kate understood that being proactive is the best way to reduce stress and avoid future problems for all parties. Next on her agenda was a meeting with their financial planner to assess their retirement savings.
Legal Issues
As Kate’s story illustrates, now is the time to put advance directives in place, including a living will and a durable power of attorney (also known as a healthcare proxy or patient advocate designation). Too often, we wait until there is a health crisis before creating these important documents. In fact, it’s estimated that nearly 44 percent of those 45 to 64 years old do not have a will, even though we acknowledge the importance of having one. In 2013, The Conversation Project, a national campaign aimed at helping
