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Financial Advice for Your 50s and 60s


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Financial Planning Throughout Your Life

By the time you're in your 50s, your kids have probably left the nest and are supporting themselves. You're probably at the highest income level of your career, and can really focus now on building your retirement assets.

Take Stock of Where You Are

To take stock of how you've done so far on planning for your retirement, first prepare a realistic estimate of what your expenses are likely to be during retirement. While many experts recommend using a percentage of your current income, this isn't a very accurate method because it doesn't take into account the diversity in personal lifestyles and financial situations.

For a more accurate estimate, think about the lifestyle you plan to have during retirement. Will you travel? Have a vacation home? Take up an expensive hobby? How much will it cost? Do a projected budget, keeping in mind that some costs (such as health insurance) are likely to increase, and some costs (such as your mortgage and costs associated with working) are likely to decrease or go away altogether.

Determine If You'll Meet Your Goal or Fall Short

Once you have a handle on your expected expenses, determine approximately how much your assets will be worth at retirement. You can get a ballpark estimate by using one of the retirement calculators available on the Internet.

Next, estimate how long your retirement assets are likely to last, considering your projected expenses and income (don't forget Social Security), the size of your nest egg, the return you expect to earn on your assets, and your life expectancy. Again, you can get a ballpark estimate of how long your money is likely to last by using an online calculator, but it may be wise to consult a financial planner for assistance with this important step.

With the above information in hand, you should have a pretty good idea of whether you can expect to meet your goal or fall short. If possible, increase your retirement contributions to 15% or more of your income.

Other Issues to Consider Now

Your 50s is also a good time to evaluate the asset allocation of your portfolio. Are you being too conservative by putting a large portion of your assets in fixed income investments? Are you taking more risk than you're comfortable with by investing too heavily in stocks or mutual funds?

Other issues to consider at this time in your life include a review of your estate plan, including a will, a durable power of attorney giving the person you designate the power to make financial decisions in your behalf if you become unable to do so yourself, and a living will outlining your wishes regarding lifesaving treatments in the case of serious illness or injury. You would be wise to consult an attorney in developing these legal documents.

As You Enter Your 60s...

As you enter your 60s, continue to fine-tune your projections and your asset allocations. Obtain an estimate of your Social Security benefits from the Social Security Administration based on your expected retirement date. Benefits are reduced if you take early retirement. Research your Medicare options and be sure to enroll by the time you reach age 65. If you retire before the age of 65, be sure you have medical insurance to cover you until you're eligible for Medicare.

Now is the time to start thinking about how you'll take your retirement assets. Will you consolidate all of your investments for ease of recordkeeping? Will you take a lump sum distribution or an annuity? Because the order in which you withdraw your funds (whether you withdraw interest, dividends, or capital gains first) can have a significant impact on taxes, it may be wise to consult a tax advisor before making this decision.

If you've planned wisely, you should be able to live comfortably through your golden years. You've earned it.

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