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Ah, the 50s, your era to adjust

THE BALTIMORE SUN

Sure, the teen years are filled with angst, the 30s with juggling work and starting a family and the 60s with issues of where to retire.

But the 50s have the other decades beat for the number of so-called life events that can strike. In this 10-year stretch you may find yourself dealing with an empty nest, widowhood, remarriage, grandparenthood, retirement and caring for elderly parents.

"Research shows there is some massing in the 50s of these events. It places families in extraordinary financial and emotional stress," said Jim Thompson, a gerontologist and director of shareholder education for Scudder Investments in Boston.

Adding to that, fifty- somethings no longer have the luxury of time they once had to recoup from financial mistakes they make during these life events.

With that in mind, financial experts offer advice on missteps people tend to make in their 50s and how to avoid them.

Those in their 50s may start to confront their mortality. Unfortunately, they often underestimate their life expectancy and potentially underestimate their retirement needs, said Thompson.

An Employee Benefit Research Institute survey found that 18 percent of American workers expect to live 10 years or less in retirement. In reality, half the men who make it to 65 can expect to live to 82 and half the women can figure to live to 86, EBRI reported. "Those are the numbers that people need to confront," Thomson said.

Putting the financial needs of others before your own can be a big blunder. For example, parents may save for a child's education but not their own retirement.

Airlines advise adults to put oxygen masks on themselves before helping children, something they should follow in money matters, too, experts said. "You can't really care for your loved ones if you don't have a solid financial foundation for the future. It's not selfish, it's practical," Thompson said.

It's advice that's hard to follow.

Towson lawyer Wallace Kleid said he squirreled away money in his 40s for retirement. But now, at age 54, he has put that on the back burner to concentrate on paying for college for his two sons, ages 19 and 13.

When Kleid went to college, his parents' finances limited his choice of schools. He doesn't want that to happen to his sons and he's determined that they graduate debt-free. He's now paying about $30,000 for tuition, room and board for his elder son.

"I'll manage this one and pay down the debt enough that, when the second ones goes, I can start this whole process all over again," he said.

And his retirement? "It will take care of itself some way or the other," he predicted.

If you're getting a late start on retirement saving for whatever reason, don't make the mistake of trying to play catch-up through overly aggressive investing, advised Bill Mason, an investment representative for Edward Jones in Olney. That can lead to investing in turbocharged mutual funds and no diversification to weather bumps in the market, he said.

Mason recommends that late-starters spread dollars among a variety of funds, including growth and income, midcap growth, international and aggressive growth. Being too conservative in investments can also be a drawback, said David Berman, a financial planner with Berman Financial Group in Timonium.

The old rule of thumb has been to subtract your age from 100 to figure out what percentage of your portfolio should be in stocks. But with longer life expectancies and interest-bearing accounts not yielding returns like they used to, you likely will need more money in stocks than the old formula suggests to provide the growth your portfolio needs, Berman said.

Don't buy a residence in another state for your retirement until you know the location well and in all seasons, advised Clare Hushbeck, an economist with the American Association of Retired Persons in Washington.

It's not unusual for new retirees to flock to Florida to take advantage of the absence of state income tax there, only to be disappointed, she said.

"There is more to life than tax avoidance," said Hushbeck. Unhappy, these retirees end up selling their homes and moving back north, usually to the Carolinas and not their native, wintry Michigan or New York. "They call them 'halfbacks,'" Hushbeck said.

Don't fail to consider future health care costs, particularly long-term care. The average cost of nursing home care in the Washington area is $60,000 a year and the average stay is four years, said Thomas Grzymala, a financial planner with Alexandria Financial Associates in Virginia. Medicaid will take care of the bills for those with few assets, and those with $1.5 million and more can shoulder the cost themselves, he said.

But those in between need to consider long-term care insurance, which is less expensive for someone in their 50s than for those in their 70s, he said.

Barbara Levin of Ellicott City saw close up the importance of taking care of health care issues early. Her retired father's health benefits became stingier when his former employer was acquired, she said. And when her parents in their 80s tried to buy long-term care insurance, they didn't qualify, Levin said. That prompted Levin and her husband, both in their 50s, to buy policies. "If anything happens, we don't want to be a burden to our children," she said.

Make sure your will and other estate documents are up-to-date. "Do you have a current will that adequately reflects your desires in the event you die today?" Grzymala said. Tax law changes a few years ago raised the amount of money that can be shielded from estate taxes, and an older will may not reflect those changes, he said.

Even though more life events may occur in your 50s, the decade isn't all bad.

Kleid said people no longer bother trying to change him. "I get to use my AARP card now," he added. "Movies are cheaper."

Do you have a personal finance issue of general interest that you would like to see addressed in this column? Contact Eileen Ambrose at 410-332-6984 or by e-mail at eileen.ambrose@baltsun.com.

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