This is the second of a two-part series on the financial moves that should be considered at various pivotal points in your life. After reviewing key decisions to consider during your 20s, 30s and 40s, we now review money moves for your 50s and beyond. Remember, aligning your financial choices with your life may help improve the pursuit of the goals most important to you.
Moves to make:
According to longtermcare.gov, nearly 70% of Americans age 65 will end up requiring assisted living or nursing care at some point during their lives. If you wait until you are concerned about long term care to address it (usually your late 60s or early 70s), it is most likely too late. (And far too expensive!) The 50s may be an ideal time to develop a plan for how you will address this financial obligation for the future. From traditional long term care insurance to life insurance policies with long term care riders, there are many ways to transfer this significant financial risk. Like saving for retirement in your 20s, the ideal time to address this issue is before you are actually beginning to think about it. The 50s can also be a great time to supercharge your retirement savings by increasing/maxing out employer plans like 401(k)s, including over-age 50 catch-ups and supplementing with additional non-retirement savings.
Moves to avoid:
Retiring too soon.
While retiring in your 50s can be a fantastic goal, it is important to recognize that it is not easily achieved. Too often, savers underestimate health care expenses, inflation and the impacts of market volatility – all variables that can lead to pre-maturely spending down your investments. Remember, the longer the time you plan to live retired, the larger your nest egg must be. Be sure to carefully review your numbers and have financial clarity before making the move to retire. Also, be careful following financial rules of thumb that are meant to apply to everyone. Instead, instead consider developing a customized plan for you and your family.
Proper planning in your 50s may help bring you in for a smooth landing in your 60s. Addressing future financial risks, continuing to boost savings and paying down liabilities may all help make that a reality.
Moves to make:
The 60s are an important time to re-visit your numbers. Are you on a sustainable path for the future? Now may be a time where it is necessary to consider recalibrating your financial picture to ensure you can continue to pursue your goals. Consider adjusting your portfolio so that it is in alignment with your life. Remember, as you move from the accumulation phase of saving to the distribution phase of spending, adjustments may be needed. Additionally, eliminating liabilities, downsizing and relocating may all need to be considered as you prepare for “life after work”.
Moves to avoid:
Waiting too long to enjoy yourself.
It is critical to enjoy yourself and make the most of your retirement – especially early in the process when you may be at your healthiest, both physically and financially. Consider setting specific retirement goals geared toward enjoying the things that are most important to you. Do not postpone living a fulfilling retirement.
The early years of retirement are an important period to take advantage of your greatest resource – time.
Moves to make:
While it is always a good idea to review and update your Will throughout life, the 70s are a critical time to ensure that you have a comprehensive estate plan. From establishing powers of attorney and trusts to reviewing living wills and gifting strategies, creating a mechanism to see that your wishes are carried out is important. Doing so may help reduce the burden of your beneficiaries while potentially reducing estate or inheritance tax liability in the future.
Keeping your estate plan to yourself
Have you shared your estate plan with your children or beneficiaries? Does your spouse or executor know where to locate your estate planning documents? Does your executor even know they were chosen to be your executor? In many cases, sharing your estate plan in a transparent way can help provide clarity to the loved ones you will be relying on in the future.
Taking steps to reduce current and future financial worry may help you focus on the priorities that are most important to you during this time.
Life is filled with difficult choices that have the power to change your path in the future. Gaining financial clarity through customized planning may help with the development of your personal goals. Since everyone’s situation is unique, consider speaking to your attorney and financial advisor to determine the most appropriate approach for you.
Kurt J. Rossi, MBA, CFP®, AIF® is a CERTIFIED FINANCIAL PLANNER & Wealth Advisor. He can be reached for questions at 732-280-7550, kurt.rossi@Independentwm.com, www.bringyourfinancestolife.com & www.Independentwm.com. LPL Financial Member FINRA/SIPC.