I always thought that our 50's would be a decade of smooth sailing toward retirement - kids mostly grown up (in or through college), at the top of our game career wise, retirement savings building up, enjoying good health. But like many people that I meet in my practice, my husband and I have hit some unexpected rough waters in the last few years.

A recent article on the financial impact of life problems for those in their 50's told me that we're not alone. I was shocked to read that 70% of people during their fifties have a negative shock that threatens their financial security. The big ones are: major medical condition (40%), health related work limitation (33%), and job loss (18%). In addition, about 10% of people suffered widowhood or divorce, and another 10% had a severe disability or entered a nursing home. For couples, the likelihood of either one getting hit with one or more of these problems during their fifties was 87%!

My husband reminded me of the lines from Robert Burns, "The best-laid schemes o' mice an 'men Gang aft agley" (go oft awry) in his poem about a mouse whose nest gets uprooted by a plough. Fatalism aside, what are we to do? Be prepared:

• First, save early. The money that you save for your retirement early in your career is probably the most important money you will ever save - because it has a chance to compound over decades. A hefty nest-egg in your 50's can be the difference between surviving a couple of layoffs and ending up bankrupt.
• Second, insure yourself properly and build up your emergency fund. Statistically, you are likely to have one of those financial shocks.
• And not "finally" but right now--enjoy your life. You can make a financial plan and review it periodically. Then get out and do the things you want to do.

If you'd like to read this article, which is based on a study by the Center for Retirement Research at Boston College, you can find it here .

Our older son Greg graduated from Hamilton College this spring, and we are very proud of him! Funny thing is, I can remember my own graduation and going out into the world as though it were just a few years ago, and not thirty. When I remember how naive I was about money, it's amazing that I became a financial planner!

 

While our sons are more knowledgeable about money than I was, in some ways they have it tougher, I think. Entry level jobs for liberals arts majors seem to be much more difficult to find. Student loans tend to be much larger. Their expectations for a comfortable life-style are higher.  This is probably the key factor that could lead them into financial no man's land. We will share with you what we've told our son to help him get started on the right track.

 

"You will feel tremendous pressure to have things, to buy things and to borrow money to finance a materialistic lifestyle. Try to resist. We know you worked hard through college and feel like it's time for a reward. Well, the truth is that working hard in college was practice for, well, working hard. Work hard and earn what you want. You will be a better person for it. Say no to the blizzard of credit cards, the lease on the car you really can't afford, and the nice apartment that eats up all your earnings. When we look at you we know that life is not about things, it's about the people that you love."

More advice for the recent graduate:

• Pick up after yourself! Pretend you're a guest. Your roommates (or parents) will appreciate it.
• Review your student loans. Most likely, you'll want to consolidate several loans so you'll have one monthly payment.
• Write down a budget that includes saving 10% AND some additional savings to set up an emergency fund. Always live below your means.
• Start a retirement account. If you aren't covered by a 401K then contribute to a deductible IRA or Roth IRA when you do your 2007 taxes. If you'd like to be convinced about the value of saving early, check out this example.
• Set some goals for what you want your money to do for you, and review those goals when you review your budget.

READ THIS PLEASE!

Social Security reform must and therefore will happen. Inform yourself about Social Security issues and the potential fixes. The Center for Retirement Research at Boston College offers this 29 page book free (as an electronic copy) at their website.

You've heard the politician's soundbites, now read the book! Preserving Social Security will require both tax increases and cuts in benefits. This booklet explains those options, how much (or ltttle) they can help, and who the winners and losers would be. You owe it to yourself and to your children to read this book.