Plan Performance Direct

THE Wealthier + Wiser Blog

Helping you better understand your money so you can reach your goals

Financial strategies for new stages of life

As a financial planner, I find myself working with people from all over life’s spectrum. People in the early stages of their careers, people building their career and family, those who are looking forward towards a fast-approaching retirement, people who’ve just retired, and others who have been retired for quite some time. I can tell you that life presents challenges for people no matter what stage of life they’re in. Wherever you find yourself on life’s journey, there are a few mile-markers that you should consider.

In the earliest stage of life your priority should be to build good habits. Take stock of your net worth. What do you owe on any liabilities? What assets do you own? Be specific and understand interest rates, balances, amortization, etc.  After you have that detail down, keep track throughout your life (this helps you make good decisions). Next, take the time to create and understand your budget. Make sure you understand your work benefits. If your company provides a retirement plan, take the time to read and understand how the plan works. Ask for a summary plan description. Sometimes your employer matches your contributions, but they can add profit-share dollars too. Any dollars saved in this life stage have the longest time to grow. These are the best retirement dollars you have!

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As you settle into a career, start a family and get married your priorities change. You need to think about others. It is vital that you purchase life insurance. Term insurance fits the needs of most people and is affordable. Look at five to ten times your earnings and coverage for 30 years. Ensure your property casualty insurance is competitive, and the coverage is appropriate. Do the work to create and maintain an estate plan. Make sure it is clear what is supposed to happen to you, your assets, and who is to care for children in the case of a disaster. In this stage you may begin to save for a child’s education, you may start a business, but you must continue to focus on your savings and ensure you are on track to meet your goals.

In the later stage of your career, you should be well on your way to being debt-free. Freedom from debt helps ensure your cash flow is strong and your expenses are low. You should have a very healthy looking net worth statement, a budget you’ve kept and honed throughout the years, and you should have your retirement in your sights. Review property casualty and consider adding an umbrella policy. Be sure to review your social security benefits, any pension benefits you’ve accrued, and be sure to enroll in Medicare when necessary. Make sure you have been reviewing your estate plan throughout the years and that it remains relevant. If you haven’t engaged a financial planner before, consider engaging one. They can help you ensure you’re tracking to meet your retirement goals. Do everything you can to be specific and conscious when envisioning your retirement.

Retirement looks different for everyone. Many continue to work somewhat, and others go cold turkey. Whatever is right for you, make sure that it meets your needs and fits with your intentions. The last thing you want to do is retire and find yourself bored out of your mind, unfulfilled or unhappy. You will have to manage many items like your social security, Medicare premiums, and importantly your investment assets. If you’ve not consolidated accounts (especially if you have assets all over the place) consider wrangling those items all together into as few accounts as possible. This allows you to keep better track of these assets and ensure that things like beneficiaries, addresses, etc. are up to date. If you haven’t done so before, you may consider enlisting the services of an investment advisor.

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As you approach the last stage of life, make sure that all aspects of your financial life are in order. Your will, your POA documents, and any other estate documents should be completely up to date. They should reflect exactly what you wish to happen. Your accounts should be well positioned to help you through the remainder of your life. Be sure beneficiaries are consistent with your estate plan and that you’ve considered who should receive certain assets and why. For example, higher-income children would be better served (from a tax perspective with all things equal) by receiving Roth assets vs regular IRA assets. Look into assisted living care if needed and have conversations with your family to better prepare them for your death or incapacity.

Remember that life will throw many curve balls at you and your family. The single best thing you can do to knock those curve balls out of the park is to plan and save.

Drake A. Qualls, CFP™