Friday, May 20, 2011

Remember how You once thought of Old?

Boomers have no problem with admitting they are getting old. They may not want to face the realities of age but the facts are there - if only in the reflection staring back from the mirror.

Remember when old was anything just a generation ahead of you. If you were ten, anyone in their thirties, more often than not, your parents and their friends, your teachers and coaches, were all old to you. It seems that as you got older, the definition of what old was was pushed back further. By the time you were 30, old was fifty. Why do we place such importance on this bookmarkers of passing time? Because each "old" has its own problems, not just health-wise as our bodies age, but financially as well.

Everyone has an answer to the conundrum of age. When it comes to money, the issues seems to double in size and complication and as a result, weigh much more on what our next stage of old will be like. You are told to invest in your retirement early and often even as the only word financial word you have any real acquaintance with is debt. In your early to late twenties, it manifests as college debt and the high cost of flying on your own for the first time. You invest little for retirement and pass up the financial golden ring to pay-as-you-go because you will never be old.

And then, a decade or so later, you are older faced with mortgages and kids and schools, saving for college, insurances and taxes and simply keeping pace with your family. You have begun to invest but in a piecemeal way. You may be auto-enrolled in your company's 401(k) if your workplace has one. If not, you probably haven't done much, at least regularly with investing for old when left to your own devices. You may have lumped summed it, which is bette than having done nothing, by dropping tax returns or bonuses in some IRA. But old costs more than you might have and debt, that first word you learned upon getting your diploma, is probably still a very real participant in your day-to-day decisions.

Forty is better and older but you now feel the bruden, mostly in the form of guilt at having underinvested. Now you struggle with older kids, college realities and aging parents. You probably have refinanced you home and if you are like many Americans, still paying for a vacation you took a couple years back all the while planning on the next. If you are like most, you haven't increased your payroll deduction in your 401(k) since you enrolled and probably haven't done much in the way of rebalancing or choosing the best age-appropriate investments.

Fifty, the real old, hits you like a ton of bricks. You may have some or all of the same problems you did at 30 (I hope not) and at 40 (kids are failing to launch, parents are a real concern) but now you grasp them to their fullest. And with a gasp and a moan, you realize that you will have to work until you are 70. the oldest person alive when you were 10.
Here are five basic things to do if you realized you are old. Or 50.
  1. Get your head around any and all debt. Nothing will bring a future to its knees faster than paying interest on borrowed money.
  2. Get out a calculator. Not just the physical kind but the online kind as well. As much as I dislike these tools, because one allows this input while another doesn't, just take the raw data: how much is currently in your retirement accounts, estimating that they will grow until you decide to retire at a modest 4% (this accounts for mistakes you can't know about like inflation and taxes) with a modest 4% withdrawal if asked to enter this as well and hit enter. Now take that number, usually expressed as a annual income, divide it by twelve and ask yourself, can you live on this?
  3. Ask yourself is this enough? If it is 75% of what you currently need to live on, you aren't just old you're wise too. It its less than that, you will need to rethink your cost of shelter, the amount of money you spend each month and in doing so, channel every available cent to the plan you have in place. It might seem like a huge hurdle and it is. But you are running out of time. It means budget, budget, budget.
Of course, it goes without saying that starting early is best. And it also goes without saying the every age has its own setbacks financially. But every age has its potential for success and as you age, the potential doesn't go away, it simply becomes a little more challenging. Worrying about money as many surveys suggest we do, will not fix the problem. Why? Because worrying is the purview of someone who has no control over a situation happening. This one is all yours and well within your ability to control.

Paul Petillo is the managing editor of and a fellow Boomer

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