Wednesday, October 20, 2010

Those Fabulous Fifties!

Turning 50 can be a sobering experience for many people.  In your 50's you may finally confront financial reality in your life - as well as deal with your eventual mortality.

Those Fabulous Fifties!  For many people, it is a decade of harsh reality - when the bills come due from the parties of the 30's and 40's - but the enjoyment of retirement of the 60's is still a decade away.  And for many folks it is a decade of reckoning - not only of where their own life is going, and has gone, but also how they are to plan their remaining years.

If you don't take a sobering look at your life in the 50's, chances are you are going to really regret it in your 60's.

As I have noted time and again in this blog, many Americans spend like drunken sailors in their 30's and 40's, convinced that they "deserve a treat" like a new luxury car - and thus squander tens, if not hundreds of thousands of dollars in hard-earned money.  And most do this through financing - convinced that their income will continue to rise on a linear trajectory over time, and thus they "can afford" to spend more and more.

But in the 50's, God has other plans.  It is a decade where you are most likely to be laid off, as your health care costs skyrocket and your salary, having increased over the years, is very high relative to a younger, cheaper employee.  And as your work skills age over time, you may be less useful and productive as well.

And it is also an age where perhaps your first health issues may manifest themselves - health issues that are telegraphing things you may have to deal with in your later years.  Perhaps things that will kill you off, eventually.  Like I said, it is a sobering decade.

My Father was laid off at age 55.  I know another family member going through the same thing at age 53.  Many friends and retirees I know had a rude awakening about their careers in the mid to late 50's.  It is not atypical - in fact it is a new norm.  Many companies, looking to cut costs, cut older employees first, as they are the most expensive in terms of salary and health care costs, and their per-dollar productivity is less than younger employees.

Yes, you might argue that your "experience" is priceless.  But as we have seen in today's technology-based economy, having old-school skills is not an asset, but a deathblow.  No one is indispensable anymore.  And as soon as you think you are, that is when you will get the layoff notice or the "early out" offer.

And suddenly, the money train stops - or at least it slows down.  And for many folks, this comes as a rude awakening.  After all, they've spent decades divvying up their weekly paycheck into little pie-chart slices - one for the mortgage, one for the car, one for groceries, etc. etc. etc. down the line.  Suddenly, you are out of pie and SOL, as they say.

The money train doesn't keep chugging faster and faster as you get older.  Yes, in general, at the start of your career, you earn little, and then your salary increases over time.  In the old days, if you worked at a factory, it would increase almost linearly until you retired.  And in the old days, if you were self-employed, a professional, or a salaried worker, it might increase linearly or even exponentially, over time, until you retired.

But even in those old-school scenarios, when you retire, your income does drop off dramatically - to about 2/3 of your working income - if you are lucky - perhaps far less.

So every career has an arc - a skyrocket shoot up, an apogee, and then hopefully a gentle re-entry and landing in retirement la-la-land.

But in many cases, there is an abort before apogee, and today more than ever, this is becoming commonplace.  Many folks start a second career in their 50's - often making far less money than they used to. And it is a hard transition, going from a Lexus to a Corolla, from Imported Champagne to Barefoot Chardonnay.   But in many cases, it is not something you have a choice about.

The entire process can be a lot easier if you are prepared - and in order to do that, you need to get off the money train when you are in your 30's and 40's.  Stop spending and start saving - and most importantly, start paying down debt.  If you have a monthly cash flow REQUIREMENT of several thousand dollars every month, it will get nasty very fasty when you get that layoff notice.

In my own life, I worry about this, having seen what my relatives and friends have gone through in their 50's - often having to make hard choices and having regrets about having squandered money in the past.  It is a common refrain of the 55-year-old.

And while my business is doing well, the marketplace is down, and I can see where income could drop off over time as prices fall.  Rather than wait for the inevitable, I am taking steps now to get off the "money train" and be able to live frugally - on an income of $20,000 a year, if need be.  If you can live on very little money - if you have to - then you can save so much more, and also be able to live a better lifestyle.

But if you have to make onerous mortgage payments and car payments and credit card payments every month - a balancing act that collapses the moment the juggling act is interrupted - then you are at a very high risk if bad things should occur.

I am looking forward to this "next chapter" in life.  It has been an interesting and sobering experience.  Many of the things I thought I would always have and do, seem much less interesting to me know.  Security and a safe retirement seem far more important than having a lot of consumer goods and debt.

And this feeling produces a sense of calm security.  It is odd.  Perhaps not euphoria, but more of a spirituality and resignation to enjoy the remainder of your days to the fullest extent possible.

Perhaps these ARE the Fabulous Fifties.  Or they can be, if you approach it from the right perspective....