How to Plan Your Financial Future in Your 50s

Aug 8, 2018 3:20 PM ET

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In your fifties, you’re clearer about who you are, what you want and what matters most. Here are some tips to help make sure your finances are keeping pace with your plans.

The dos:

✔ Ramp up your savings. Contributing as much of your income as possible will help boost your retirement savings. If you follow the 50/30/20 rule of thumb, at least 20% of your income should go towards savings (and the remaining 50% towards necessities and 30% towards discretionary items). If you’re playing catch up, the more of your income you can direct towards your savings the better. The good news is that you should be earning more than your earlier years.

✔ Review your asset mix. Asset allocation is widely considered the most significant driver of investment returns, and should be adjusted as you age. A common rule of thumb to getting the right mix is holding a percentage of stocks equal to 100 minus your age. So, for example a 55-year old could hold a mix of 45% equities and 55% bonds. Discuss with your financial advisor what asset allocation is best for your needs, after weighing all the necessary factors.

✔ Prepare to leave a legacy. Estate planning is a critical component of leaving an inheritance for your family and loved ones – first and foremost it involves having an up-to-date Will. If you have neglected writing a Will, like many Canadians, now is a great time to do so. Discussing your wishes with family will avoid any confusion later on.

The don’ts:

✘ Rack up unnecessary debt. As much as one-third of retired people over 55 are still carrying debt,1 and seniors are increasing their debt loads at a much faster pace than other Canadians.2 Longevity risk, the risk of outliving your savings, has increased with increased lifespans and is amplified further when debt also needs to be repaid.

✘ Neglect to discuss retirement with your spouse. Discussing money matters with your partner is important throughout a relationship, but perhaps most important when retirement planning. You may have modest plans to spend more time with family, while your spouse may be dreaming of travelling the world. Retirement planning needs to be part of the conversation, the earlier the better. Visiting your financial advisor together can help ensure you’re travelling the same path and have prepared to reach your shared retirement goals.

✘ Assume your house is your retirement. Many people expect to rely on their homes for retirement income. Not surprisingly, a home is one of the largest assets people own. While the last decade has seen home prices rise across Canada, which has likely increased the value of your home, if there’s a correction when you choose to sell, this could put a significant dent in your expected nest egg. If you are downsizing, moving to a smaller home or condo may free up less home equity than you’re anticipated, particularly if you don’t want to adjust your lifestyle. Where you will want to live is a huge part of your retirement plan, make sure to talk this over with your partner and check in with your financial advisor to discuss options that will work for your future.

Check out how to plan your financial future in your 20s, 30s, 40s and 60s.

1 Statistics Canada, April 27, 2011. (most recently available data)

2. Equifax report, September 2015.

Legal Disclaimer: This article is provided for information purposes only.  It is not to be relied upon as investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell.  Information contained in this article, including information relating to interest rates, market conditions, tax rules, and other investment factors are subject to change without notice and The Bank of Nova Scotia is not responsible to update this information. All third party sources are believed to be accurate and reliable as of the date of publication and The Bank of Nova Scotia does not guarantee its accuracy or reliability.  Readers should consult their own professional advisor for specific investment and/or tax advice tailored to their needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.