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Empty Nest: Fixing the Cracks in the Nest Egg
Boost your retirement savings. With the kids grown and on their own, your expenses should be shrinking. Meanwhile, you're at the peak of your earning potential. Make the most of this by contributing as much as you can to your retirement accounts. Once you turn 50, you're allowed to put an additional $5,500 a year in a 401(k), for a total of $22,000, as well as an extra $1,000 in an IRA, for a total of $6,000. If you've been stung by market losses, don't assume that you should increase your risk (say, by increasing the portion of your account that's invested in stock mutual funds) in the hope of repairing the damage. Be realistic about the fact that you may need to work longer than you'd planned. To make sure your savings are in line with your goals, services like Financial Engines (financialengines.com) will get you on track for about $40 for a three-month subscription.
Prepare for emergencies. George Pokorny, 57, of St. Paul, Minnesota, was laid off last spring when the nursing facility he'd worked in for 31 years shut down. He has been living off his savings while looking for a new job. Pokorny expects that he'll have to work well into his 60s to make up for lost time. "I took care of seniors for so long, and now that I'm almost one myself, who's going to take care of me?" he asks.
Pokorny isn't alone; about 13 percent of laid-off Americans are 55 and older. Getting laid off relatively late in life can be devastating to your finances, your dreams, even your health (if you can't get insurance). That's why it's important to have money in the bank, over and above your retirement assets, to pay the bills while you're planning your next move.
"We all have to work today with the possibility that we may get laid off," says financial planner Frank Boucher. He tells his clients -- of all ages -- to try to save a year's worth of living expenses. You can search for the best savings yields at bankrate.com.
Keep the nest empty. In a tough economy, more young adults move back home because they've lost a job or a house, got divorced, or are simply looking for a cozy spot to regroup. We all want to help our kids when they hit hard times, but experts insist parents establish firm boundaries with their boomerang kids. Talk through realistic time limits: Can they get back on their feet in three months? Six months? At the very least, get them to chip in for household expenses. The cardinal rule: Don't let their needs overwhelm your budget to the point that you skimp on your retirement savings.
Also visit: aarp.org
A good collection of retirement news, advice, and resources from AARP.
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