How to Protect Yourself from the Financial Risk of Turning 50

401k, Ageing, Financial Security, IRA, Money Management, Retirement, Saving, Spending, Work

February 21, 2019

A new study that looked at the employment and pay patterns for people once they turn 50 should be a wake-up call for anyone approaching or in their 50s. About half of the people in the study suffered a job loss after turning 50 and only one in 10 eventually got a job that paid them at least as much as they had been making. By the time they reached 65, people who had lost their job reported income that was nearly 15% lower than people who weren’t laid off in their 50s.

Okay now. I know that is not cheery news. But once you are aware of this trend, you have a choice. You can stick your head in the sand and pretend it will never happen to your family, or you can stand in the truth and take steps now to build a financial security plan. You know what I want you to do. And I have some steps you can take, starting right now:

  1. Turbo charge your retirement savings. If you are working today, great. Do your very best to save as much as possible today because there is no guarantee you will be in a position to continue saving all the way up until retiring at 67 or 70. Anyone over 50 years old can save $7,000 in an IRA and $25,000 in a 401(k) in 2019. And for those of you in your 20s, 30s and 40s: You should be motivated to boost your retirement savings so you won’t feel so much pressure in your 50s. Anyone under 50 can save $6,000 in an IRA and $19,000 in a 401(k) this year.
  2. Your. Spending. ASAP. If you just read my first piece of advice and said, “No way, Suze, I don’t have any money to save more.” I am challenging you to be honest. As I say repeatedly, it is the rare household that can’t find ways to trim or cut their spending.
  3. Consider downsizing now, not later. This is a big step, but I want you to give it serious consideration. If you own a home that you still have a mortgage on, and that is now a lot bigger than you need for your empty nest, consider what the financial payoff might be from downsizing. Home prices have risen a lot since the financial crisis; you may have some solid equity that you can bank on. And now is a good time to sell a home, and you are selling from strength, not panicked weakness once you are laid off. Buy a smaller, less expensive home with cash from a sale today and you will be in a stronger position to weather the future. Or maybe you consider renting. Then all the capital gains from your sale can be added to your retirement savings.
  4. Turn off your Work Cruise Control. Look, you and I both know that there is age discrimination in the workplace. There is no way to 100% protect yourself from this. But you can help yourself a lot by making sure that you are a highly valued employee. That means making sure your skills are as up to date as a 25-year-old who the boss could hire instead of sticking with you. Are you attending every workplace training opportunity? Or taking an online training class (they are often free or very affordable)? Or enrolling at the local community college for a certification program? Are you checking in with your supervisor on ways you might step up and do even more?
  5. No borrowing for college. If the prospect of being laid off and having a permanent hit to your income gives you chills, then you have no business taking out loans to send your kid to college. That’s a smart signal that you need to focus on building up your financial security so you can better withstand a setback. Your kid can still go to college. An in-state public school is the way to go; your child can use Federal Stafford loans to pay for most, if not all, of the costs. You can chip in from your regular cash flow. If that still comes up short, your kid can work part-time while in school.

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