Financial risks in your fifties

People in their 50s are beginning to recognize the reality of retirement. You’re part of the sandwich generation; your parents provide a preview of one future scenario as your kids’ costs cut into your retirement portfolio. It’s a tough balancing act, which is why it’s the time to get serious about putting your finances in order.

Here are three wake-up calls—and some steps you can take.

For more information on this subject, read Financial Planning in Your Fifties.

You have to support mom and dad. What you don’t know about your parents’ financial affairs can cost you. There may be an emergency that forces you to scramble to respond—and pay their bills from your savings. Even when there isn’t a crisis, knowing their financial situation gives you options about organizing your own savings strategy to include them.

Action: AARP has a list of questions to ask your parents and helpful suggestions about how to raise the topic in its online article “35 Questions to Ask Your Aging Parents.” Other questions to ask:

• Do your parents have sufficient savings to afford the lifestyle and medical choices they’ll need to make as they age?

• Are they still paying a mortgage?

• What does their health insurance cover?

• Do you know their health plans and preferences? Find out the names of the important people in their lives: their doctors, lawyer, financial adviser, faith leader, and friends and neighbors to call on for help.

Your term life insurance runs out. Many people take out just enough insurance to cover their kids’ college education. If you bought a 20-year policy in your late 30s, coverage will conclude in your late 50s. But before letting the policy lapse, look ahead to your retirement accounts. “If the bigger earner dies, the life insurance can replace that income for the surviving spouse,” points out John DiMatteo, a financial planner with the DiMatteo Group in Shelton, Conn.

Action: Consider extending your policy while it’s still active. “It’s best to be sure to match the term of the policy with the need in the first place, but we often see people underestimate the term and then need to replace it,” DiMatteo says. “In that case, it is always better to do it sooner rather than later.”

Your medical costs spiral. Because so many of us have an increased understanding of the importance of a good diet, regular exercise, and a healthier lifestyle, 50 has been called the new 40. That’s the good news. The bad news is that increased longevity ups the risk of debilitating and costly conditions that can cripple your lifestyle and sap your savings.

Action: If you generally enjoy good health, consider switching to a high-deductible insurance plan. (The popular Silver plans sold on health insurance marketplaces in 2014 had an average deductible of about $2,900.) Sock away the money saved on the lower premiums in a health- spending account (HSA). Contributions are tax-deductible, and you can withdraw money tax-free for qualified medical expenses, such as deductibles, co-pays, hearing aids, and eyeglasses. Best of all, the money in an HSA is yours to keep forever.

Your first line of protection, however, is improving your fitness. The dividend of good health pays off for decades by giving you less expensive insurance options and the energy to keep working, if you choose. “Your 50s are the time to get disciplined about getting in shape,” says Rick Kahler, founder of the Kahler Financial Group in Rapid City, S.D. Join a health club and consult with a trainer to create a fitness regimen that’s right for you. Check the fine print of your health-insurance policy for gym reimbursements; many reimburse you up to $400 per year if you go to a gym at least 50 times every six months.

—Catherine Fredman

A version of this article previously appeared in the April 2015 Consumer Reports Money Adviser.

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