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Forge Your Wealth is meant for education and entertainment and should not be used for financial advice.
Most people have the dream to work for 40 years, grow old and then quit. That dream is changing for many reasons including social security cuts, and the push to extend the use of retirement funds. However, that dream may also be changing because of the new retirement age: your 50s. Do not believe that these will be the “golden years” you desired though.
You Could Be Let Go Around Your Fifties
Propublica published that only 16% of people who enter their 50s still have the job they started with years ago. Some retire by choice, but out of the 84% who lose their job, 56% did not have a choice in the matter.
The “new retirement age” of ~50 is not one of choice, but one that could likely be forced upon you. Will you be prepared for this new retirement age?
Prepare For Your New Retirement Age
I have previously stated that the earlier you plan for retirement, the more your balance will accumulate from compound interest. Admittedly, that was suggestive. With this new information, I am more worried about people being unprepared and now believe you MUST take steps as early as possible to prepare for retirement.
Contribute To Your Retirement Fund NOW!
Even if you are already well past you 20s or 30s, it is not too late to plan for retirement. You can and should contribute as much as possible into your retirement accounts. However, since you will be closer to your new retirement age, you will have to invest in lower risk investments. I would recommend investing in, at the riskiest, balanced funds with at most 70% equities. High risk investments such as real estate may be too much to take on at the moment.
Do not feel bad that you have not contributed much in your retirement fund. There is a reason that practically every retirement account allows people to contribute more to their retirement in their 50s, so you can catch up.
Start A Side Hustle Or Sell Your Business
With today’s gig economy, there are many opportunities to try to make money on the side. It is questionable if these gigs will provide you with any real considerable amount of income, but they are flexible enough to do with your other job and can give you a boost in income to give your retirement a boost.
It is never too late to try to make a business. Almost everyone has some idea that is worthy of profits. Many of these ideas can be started with little, if any money. It may take a while to build any income from a business platform. If you get started earlier, you are more likely to develop some income.
I once talked to someone who was a well established medical professional. I did not ask his age because I try my best not to be rude, especially to strangers. Still, he brought up his daughter who was in graduate school like me at the time. He said half-jokingly that his daughter better do good at school so they can retire. I did not say anything. But my body language must speak loudly because shortly after he said that, he stated he was mostly joking. He also added that he was planning on selling his medical firm for his retirement.
The latter part of his plan is not a bad plan. Your business is an asset and like any of your assets, you can liquidate them to have income.
What If You Are Already Out Of A Job?
Normally I write my blog for people of my generation who have just gotten started with their career and want to get started with taking charge of their finances. But the more I read about finances, the more I realize that people do not take charge of their finances as early as I did. I started Forge Your Wealth to provide motivation and knowledge to people who are just starting to take charge of their finances, that includes anyone who is just started to take care of their finances in their 90s.
If you are already out of a job and have no other source of income, you need to find a job so you can have at least one stream of income. It may be tempting to hold out for a job that pays as well, if not even better, than your previous. On the contrary, you may have to settle for a lower paying job. People past their 50s who lost their job usually settle for a job that pays 27% less on average.
Do not worry too much, you are far from the only one who is going through this. You may not be in an ideal situation, but you can still have control. In addition, with at least one job providing income, you could work on your retirement fund, or any side hustle you have in mind.
You May Have To Work For Less, But People Are Hiring
Although I just made it sound like employers do not want people over 50 working for them, the opposite appears to be true. The age demographic that is growing the most recently are those over 50, and the unemployment rate is the smallest among people 50 or over. The main reason for this may be because of lack in retirement planning, but employers are more open to hire people over 50 because there are smaller turnover rates from older generations. If anything, you may be more desirable as a new employee (even if the paycheck does not reflect that).
Furthermore, never listen to anyone who says you are too old to work. Age has never been a factor into your capability to work. My family is a great example of this. I said this once before and I will say it again, my grandfather is in his 80s and he can do construction work better than almost anyone my age.
You Can Find Some Work At Almost Any Age
I do not care what your age is. Truth is most conditions alone will not deter you from doing what needs to be done for yourself and your loved ones. There are many businesses that are very open to hiring older workers. Furthermore, there are many positions available in the gig economy in which have just about as much concern for your age as I do (next to none).
You May Need To Downsize
In fact, I will be bold and state that you almost certainly will have to downsize. To be completely honest though, I tend to see that people over their 50s are less focused on consumerism and shift their priorities in other places. For that reason, many are looking to downsize.
This is very doable if you are renting, but if you want to downsize your house, you may face some issues. If you are looking for a smaller house, the supply of smaller houses is tight and many of the first-time homeowners want them too. Ultimately, you may only be able to sell your home to save tens of thousands. That would not even cover selling costs in many situations.
In addition, most new home buyers do not want the houses of many older workers. Younger generations do not want too large family-sized houses for their nonexistent families. Most of my generation is single. They do not have the same needs as older generations. Simply put, they do not need the same types of houses. Your house is not likely to be a hot seller and you will likely try to buy a hot seller.
Sorry, but if you want to downsize and you own a house that is too large for your needs, you will need to be creative for the downsizing to work. That may not be an issue, you could easily rent out your house, potentially to numerous tenants. You could also try to set up a business within your house, or even rent out space in your house for businesses to use. Note that you must be sure that your house can be used for business purposes, even having a property in a different zip code could have different effects on your property.
Change Your Priorities
If you are downsizing or trying to do anything large to try to make it through in your forced retirement, you need to change other priorities. This is especially hard with families. It is very difficult to tell children no when it comes to their desires from ice cream to education. But it makes no sense to pay for your child’s or grandchild’s education when you cannot even pay for yourself. You will likely have to have hard conversations with your family. But that is all so you do not have to invade their independence and live with them.
Oh I forgot to mention, you may have to live with other family. If you cannot find a job, nor hold up any livable lifestyle, you may have to find a free place to live. While adult children living with their parents are increasing, people ignore the fact that more parents are now living with their child(ren). I will say this again, your child(ren) are not your retirement plan.
Since I have learned that the new retirement age seems to be closer to your 50s than 60s, retirement is now a higher priority for me, when I am in my 20s. It is now even higher than buying a house. It should now be a higher priority for you.
I know that in many cases, having a house lowers the amount you need for retirement. That is true, but a house value only increases with inflation, almost always requires debt where the interest rate is above inflation, and only produce money if people want to buy. It is not always the best investment and focusing too much on it will take away from other investment opportunities. Equities are almost always in demand when the company is profitable and will produce money even when no one is buying, sometimes even when it is not profitable.
I am not saying you should not buy a house, just PLEASE do not make your house your largest investment like most people. Most people are broke or worse. A house may be an investment, but not if treated the same way as most people. You are going to make changes that most real estate investors would cringe about. Even if you only make changes that are seen as valuable, things will change. The new retirement age may be ~50, but if you have just started in your career, even if you only own your house for 10 years, chances are that some previously valuable aspect for your house may not be valuable any more. In fact, it may lower the value. Don’t believe me, ask a real estate investor how much they are excited about buying a property that is open concept.
New Financial Advice
Some say that the best financial advice a few decades ago will not work now. However, the retirement crisis is hitting older generations hard, and many are without retirement income. I wonder if the old financial advice worked at all. No financial advice works for everyone.
In fact, I am taking back one of my own pieces of retirement advice. I have previously stated that investing for retirement is important. In addition, I stated that if you are in your 20s, retirement does not need to be a top priority. Now retirement should be in your top three priorities. For instance if you are paying off two debts, keep paying them off. But then the only other financial goal you should have is preparing for retirement. Do not try to save for a house or a new car on top of all that. You will be too unfocused.
I have personally increased how much I am contributing to my retirement, even with a comfortable amount for retirement. But if I do have to deal with the new retirement age of ~50, the amount I have right now may not be as comfortable as I thought. Buying a house can wait a few years. After all I am only 27, at least at the time I wrote this post.
With the “new retirement age” being ~50, retirement may be coming sooner than you think. It is best to prepare for retirement now to forge your wealth.