Your 50s are one of a few pivotal financial times in your life. This decade brings new financial opportunities and challenges alike, and the adjustments you make now will greatly affect your future in retirement.
This blog will explore the common money mistakes people make in their 50s and offer practical advice on avoiding them.
Whether it’s managing debt (the average amount of debt 45-54-year-old Canadians have is $130,000), catching up on retirement savings, or planning for healthcare expenses, taking proactive steps now can set you up for a more secure and stress-free retirement.
You’ll also hear from Vancity and Aviso Wealth advisor Tina Cheung. She kindly sat down with us to discuss money mistakes to avoid in your 50s, giving you professional insight into the subject.
Let’s dive into the crucial financial considerations that can help you enjoy your golden years with peace of mind.
Not planning for inflation can rob you.
Tina Cheung calls inflation the “hidden thief” due to its sneaky way of impacting your purchasing power. Overlooking the impact of inflation can erode your purchasing power at retirement, and Tina says it is one of the easiest things to overlook as you head into your golden years.
“The cost of care, the cost of food, the cost of living is going to continue to increase,” says Tina. “And if you’re investing too conservatively, you’ll end up with a lower growth rate that can’t keep pace with inflation. It’s important to protect your investments near retirement, so striking a balance between risk and the growth of your portfolio is critical.”
“The cost of care, the cost of food, the cost of living is going to continue to increase. And if you’re investing too conservatively, you’ll end up with a lower growth rate that can’t keep pace with inflation.” Tina Cheung, Vancity and Aviso Wealth advisor
Overlooking healthcare expenses will catch up to you.
When you’re in your 50s and on the cusp of retirement, the last thing you want to think about is later-in-life care and rising healthcare costs. But the reality is the more you age, the more your healthcare costs go up.
When you’re planning your retirement finances, you will want to earmark a portion for medical expenses. Now is also the time to consider long-term care insurance.
“Underestimating healthcare costs is a big one,” says Tina. “Options range from independent living to memory loss care to nursing homes, and those can cost anywhere from $5,000 to 15,000 a month. Often, this is overlooked as you focus on building a retirement nest egg.”
Earmarking a portion of your retirement savings for later-in-life care will help alleviate financial burdens down the road. Tina says speaking to a financial advisor can help you create a roadmap for all of your future financial stages.
Taking on too much consumer debt or not paying down your debt.
It can be tempting to splurge in your 50s and buy that speedboat you’ve always wanted or renovate your home. But taking on consumer debt you can’t easily pay off can haunt you into your retirement, potentially putting a strain on your financial security.
Instead of taking on more consumer debt, focusing on paying off the debts you do have, like your mortgage, is a way to ensure you’re not living beyond your means into retirement.
Carrying debt into retirement can diminish your savings, reduce your spending power, and create stress during what should be your golden years. So, a popular retirement goal is to be debt-free, but that’s not the reality for all Canadians. Speaking with a financial advisor or creating a budget with the goal of paying down your debt and not collecting more can help as you approach retirement.
Carrying debt into retirement can diminish your savings, reduce your spending power, and create stress during what should be your golden years.
Not catching up on retirement savings.
While paying down your debts is important, your 50s are also a great time to build up your retirement accounts.
Maximizing your RRSP or TFSA contributions can help you to reach your retirement savings goals sooner. Through your RRSP or TFSA contributions, you can take advantage of tax benefits and compound growth, both of which can help you reach your retirement savings goals sooner.
It’s also wise to review your investment strategy and ensure it’s aligned with your retirement timeline so you can retire with confidence and peace of mind.
On the subject of TFSAs, Tina suggests that if you have a spouse or common-law partner, to name them as a successor holder, not a beneficiary. This has a few benefits:
- Upon your death, your TFSA will stay intact, transferring ‘as is’ to your spouse,
- This will not reduce your spouse’s TFSA contribution room, and
- Assets in the TFSA remain tax-free after the date of death.
Many Canadians feel as though they have fallen behind on saving for retirement. If this sounds like you, instead of stressing about not saving, speak to a financial advisor today to come up with a plan.
While paying down your debts is important, your 50s are also a great time to build up your retirement accounts.
Helping adult children or parents financially should be done with a plan in place.
While it’s natural to want to support your kids, you need to keep a balance between the support given and your ability to save for your financial future.
Many retirees or pre-retirees (48% of Canadians aged 50 and up) have given a significant sum of money to their adult children. But when doing so, it’s important to prioritize your financial security, ensuring you have the resources needed for retirement. One way to do so is with open communication with your children about your financial boundaries and budget.
This is also true when it comes to caring for your parents. Tina says, “Having a conversation with your kids or your parents on what the future looks like is important.” You should discuss your plans to support your parents or children with your advisor so they can help you build the cost into your overall financial plan.
Ignoring estate planning can have drastic consequences.
While 74% of Canadians aged 55 years and older report having a will, the number drops to 34% in the 35 to 54 age range.
Having a will in place makes sure your assets are protected and your financial wishes are followed if anything were to happen to you. It also helps to minimize potential conflicts among heirs and can reduce the tax burden on your estate.
“Having a will is like you’re driving the bus. You’re giving the instructions on how you want to distribute your assets,” says Tina. With a will, your wealth is transferred the way you want. Tina recommends working with a lawyer to glean the best path forward. “A lawyer will give you guidance because sometimes the direction you’re driving the bus may not be the best option.”
Beyond your will, consider other aspects of estate planning, such as setting up Power of attorney, designating beneficiaries, and planning for healthcare directives.
Overestimating your government benefits is a common retiree mistake.
While your Canadian Pension Plan (CPP) and Old Age Security pension (OAS) will help a bit in retirement, it’s important you’re not solely dependent on them.
“It’s so important to work with an advisor,” Tina says. “An advisor can keep you on track, guide you through all these different stages, and create a roadmap.” An advisor will keep crucial financial factors top of mind, like how much you will need to supplement your government benefits or when you should be taking advantage of your CPP or OAS.
“An advisor can keep you on track, guide you through all these different stages, and create a roadmap.”
Vancity and Aviso Wealth advisors like Tina Cheung help Vancity members enter their retirement financially healthy, making sure they can have the lifestyle they want throughout their entire lives. Connect with Vancity to explore solutions for your unique needs.
Disclaimer: Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. The information contained in this article is from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is not intended to be investment, tax or other advice and should not be relied on without seeking the guidance of a professional to ensure your circumstances are properly considered. Please see our Terms of Use.
