Alan Lakein once observed that “Planning is bringing the future into the present so that you can do something about it now.”
No matter what stage in life you are in, working from a solid plan to pursue financial independence can be so much easier.
We have been helping clients retire since 1989, and have found one thing to be certain, everyone has questions—and those questions vary by your stage in life.
Planning in your 20’s The biggest mistake that you can make here is to not begin.
- Get focused: Want to retire at 40? Save $1 million dollars? Save for your kids’ college? Once the future goal is established, we work backwards to create the strategy for today.
- Save early and often: Time is truly of the essence at this stage due to compounding (Einstein called this the 8th wonder of the world.) And it works two ways so don’t forget to attack student loans hard.
- Understand your risks: Life happens so we must be protected through life, health, income, and auto insurance, especially as you start a family.
Planning in your 30’s This is often a time of great change with job opportunities, or starting a family. Formal planning becomes important.
- Ramp up savings and clean up debt: There is still plenty of time for compounding and a systematic approach to saving can be very effective.
- The Tax Man Cometh: With two incomes likely, ensure that more of your hard earned dollars stay in your pocket and not Uncle Sam’s by using tax-deferred retirement accounts like 401ks and IRAs.
- Job change: Better to roll over your company savings than to spend it. Retirement is on the horizon!
Planning in your 40’s Sandwiched between aging parents and growing children, this decade brings the reality of long-term responsibilities clearly into focus. Planning becomes urgent.
- Transfer risk: Now is the time to make sure your insurance plans are in place to carry you through to the end. Legal documents such as wills and powers-of-attorney are crucial.
- Pay it off: Zero balances at the first of each month gives you freedom and flexibility, and allows you to save more.
- Peer into the future: Update (or create) your financial plan now to focus the lens of retirement which is now in full view.
Planning in your 50’s This milestone decade provides a reprieve from college funding, raising children, and hopefully a mortgage, but is often offset by aging parent care. Retirement is now firmly centered in the crosshairs.
- Clear the nest: Cutting the financial cord to the kids will not only improve your retirement planning, but will foster financial independence with your children as well.
- Consider your health: Chronic health issues tend to sprout about now and long-term care insurance is a crucial patch to a potentially disastrous financial strain from an unexpected nursing home stay down the road. Get it now while you’re healthy and it’s affordable.
- Catch up: Once you hit 50, higher “catch up” contributions can be made to IRAs and many other retirement plans.
Planning in your 60’s Now the big question has finally arrived: how much is enough, and when can I call it quits?
- Consider your spending: This is not the time for guessing; better to track your monthly expenditures for a few months to get a handle on how much income will actually be needed. A housing downsize may be prudent.
- Cash (flow) is king: Now the trick is to devise a distribution strategy from your investments that fills the gap.
- Think long term: Expect a 30 year, two person retirement. Chances are very good that at least one of you will make it to 95 or beyond so each year of postponement allows for additional compounding and one less year to fund in retirement. Consider part-time work.
Check out the helpful calculators, articles, and videos at www.reinertwealthmanagement.com.
Mark joined IDS Financial Services, a division of American Express, in 1989 as a financial advisor and obtained his CERTIFIED FINANCIAL PLANNER (TM) designation in 1995. As an independent advisor with LPL Financial, he serves clients through financial planning and investment advising.
Mark is a former adjunct faculty member of Baker University where he taught graduate and undergraduate finance and economics courses for nearly ten years. Mark has been featured in several publications regarding financial advice and is a regular speaker with various civic and academic organizations.
Mark received his undergraduate degree from St. Mary of the Plains College in 1984 and MBA from Pittsburg State University in 1988 after working in the banking industry.