Friday, December 9, 2011

Contingencies for After 50

So you're in your 50's and are eagerly awaiting retirement. You've worked hard your whole life, saved where possible, shored up money in a retirement plan and various safe investments, secured low interest home loans, and financed your kids' college educations. You're good to go, right? Not necessarily. Take a step back and look at the economic landscape right now. Hundreds of thousands of people your age thought they were safe and discovered that weakened financial institutions everywhere are forcing American to reappraise their money. Here are a few contingencies that may force you to reassess your retirement years: 

Your kids may not be able to repay their student loans. It's a tough environment for graduates and unemployment rates are high. With the combination of rent, the cost of living, and car payments, your kid may not be able to take on student loans immediately, which means you will. Student loan companies are not always quick to forebear, so you will need to make sure you can make those monthly payments on your child's behalf.

You may have to borrow from your 401(k) or IRA. Because of the previous factor and the ones to come, you may find yourself needing to borrow from your retirement plan. Just remember that the borrowed money will not be invested and will be taxed. This should be avoided if at all possible.

You may not be able to sell your home for the price you were expecting. The housing market plummeted and is not expected to recover anytime soon, at least not to the pre-recession bubble. Whatever you were expecting for your house could easily be cut in half by the time you make the sell. Of course, the flip side to this is that you'll probably be able to get a great deal on whatever new home you're looking to buy.

It's no stock market for old men. Sorry to be frank, but the current stock market is as volatile as it has ever been and investing should not be entered into lightly. Hopefully you didn't lose too much in the crash of a few years ago but that money's not coming back. Your retirement money is probably safer in bonds, or back into your IRA or 401k.

This post is not meant to frighten you but it is meant to make you aware of some of the contingencies that you should prepare for in your 50's. As you move towards retirement, consider the financial obligations of your children, your home, your loans, and your investments.

This guest post is by financial writer Alex Summers.

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