Folks in their 50s are typically in a time of life when they are getting pulled in multiple directions. Many still have kids at home, but some are preparing to send their oldest offspring to college or career training. At the same time, they may also be anticipating the need to care for older parents or other relatives. Career-wise, they’re often in their peak earning years, either by having risen through the ranks in their industry or by hitting their stride in a self-owned business. Taxes are becoming more of a concern, and making sure they are prepared for the future is also top of mind.
I should know. In my personal experience, the 50s have been a time for a lot of re-thinking—not just financially, but in my whole approach to life. As a person who lost my father when he was 49 and a sister at 37, I probably have a different perspective than most. I can tell you that realizing you’ve already lived longer than one of your parents can provoke a lot of reflection and rethinking. It makes you think more about living in the present and making the most out of your time. I tend to place more value on traveling, seeing the world, and living out my purpose. I am extremely blessed to have a career that not only provides purpose but also provides the flexibility to do some things, work remotely, and work longer. Such a view involves a different approach to spending and saving than that taken by someone who is intent upon retiring at a specific age or date and walking away completely from a career. Both goals are valid and important but indicate a different set of priorities and, consequently, a different set of strategies.
No matter what, keep in mind that You may have a lot of life ahead of you, but the amount of time that you have to financially prepare, is getting shorter and less certain.
I recently participated in a short exercise that I thought was going to be cheesy but ended up shedding some light. In a group setting, we were asked to close our eyes and imagine ourselves at age 90—about forty or so years from now. We were asked to think about ourselves at that end of the age spectrum and what we would like to be able to look back on. We were asked to think about what we would have liked to have accomplished, how we would enjoy spending our time, how we wanted to be remembered and our legacy. For me, it was helpful to imagine a future and contemplate changes I would like to make. What would your future look like? You may want to take a moment and give it a try.
Making a Plan
Having a map without a destination is not the most helpful tool. That’s why asking yourself questions like those above is so important; in fact, it’s the only way you can start to design a strategy that’s right for you.
While retirement is probably what most people think about, it’s not the only worthwhile possibility. Someone like me might be willing to work a little longer if they want to allocate more assets toward personal fulfillment in the nearer term. For that individual, having the right mix of liquid assets and growth-producing taxable investment accounts could provide resources for achieving more of their imagined possibilities, sooner rather than later. At the same time, they do not want to miss out on the tax-advantaged vehicles that could provide valuable growth potential for the future. In addition, their plan will likely need to incorporate more life and disability insurance, to provide for those they care about in the event of premature death or incapacity. It is a balancing act, that takes careful planning and adjusts.
On the other side of the coin, someone who has a set aim of retiring at a certain age would need a different approach. The focus becomes ensuring enough savings to provide the needed amount of income once they’ve stopped working. This will involve consideration of tax liability, both now and during retirement. Those who intend to retire before age 59 ½ will need access to funds in taxable accounts until they are eligible to begin withdrawing from tax-advantaged retirement accounts. They may also want to focus on maximizing contributions to tax-advantaged retirement accounts. This might involve catch-up contributions to IRAs, 401(k), 403(b), and back-door Roth IRA contributions. Retiring at an earlier age and delaying Social Security can provide significant tax savings opportunities. In this case, those individuals, who have filled buckets in taxable accounts, pre-tax retirement accounts (IRAs and 401ks), and Roth IRAs may have the flexibility to withdraw assets at very low tax rates, opportunities to convert IRAs to Roth IRAs, and maybe even get their health insurance paid for by tax credits through the ACA (Affordable Care Act). Disability insurance may no longer be needed, and life insurance may become less of a necessity, but long-term care may jump to the front of the line. Carefully considering when to take Social Security will be an important exercise. There are many factors that weigh in to this decision, such as income needs, tax brackets, part-time work, and life expectancy.
Again, knowing where you want to be in the future is the first step to establishing a thoughtful and detailed plan that will help you achieve your goals.
Don’t Get “Sandwiched.”
Many in their 50s are candidates for membership in the “sandwich generation”: those who are simultaneously taking care of children still at home and facing responsibility for the care of aging parents or other older family members. So, it may be important to ask clarifying questions like these:
- How involved can I afford to be in my kids’ finances, once they’re out on their own (and have appropriate expectations been set)?
- What resources do my aging parents have, and what plans (legal, financial, other) have they put in place?
- Do I have adequate insurance (of the right types) to take care of my family and myself?
- Should I be looking at long-term care insurance (LTCI) for myself or someone I care about?
The point is this: to get the answers that are right for you, it’s necessary to ask the right questions. At Curio, we believe in the power of asking the right questions. That’s why our client relationships are built on an open-ended process of discovery; the more we know, the better we can help. To learn more, why not take a listen to Episode 34 in our podcast series, “Financial Security”? You can check it out by clicking here.
