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Financial Planning Thoughts
Financial Planning Thoughts
Financial Planning Thoughts
Retirement seems really far off when you start saving and saving enough may seem impossible. Consistent investing over the years can significantly pay off in your retirement years. People often have questions about where to put their money. There are qualified accounts and non-qualified accounts. Investments within those accounts may include stocks, bonds, mutual funds, REITS, annuities, and many more. Balancing safety and growth is important. Automatic withdrawals are a great resource to utilize so that you stay on track with your savings. Talk with your financial planner to learn more about the different types of investments that may be right for you and how you can grow your money tax-deferred.
Children cost A LOT of money and college is one of the biggest expenses. Fortunately there are great savings plans available to help you, like the 529 plans. Consistent investing over the years can significantly help pay those tuition bills. There are also great tax-benefits with 529 plans – any earnings are generally tax-free and most states offer tax deductions on the 529 contribution dollars. You can sometimes select plans that transition with your child to provide more growth opportunity when he/she is young and less risk when he/she is getting closer to college years. Learn more about the options available and about how you can get set-up to automatically contribute to a college savings plan. Keep in mind that we do not offer tax advice; you should consult a qualified tax professional regarding the tax implications of specific transaction or strategy on your unique situation.
Preparing for Retirement
When you were younger, you had babies and protected them by buying life insurance. You didn’t think you would die but it was so important to make sure that your babies were taken care of if you were gone. You cannot buy a house without having home owners insurance in case the house burns down. You do not think it will burn down but it is so important because you would want to replace at least the replaceable part of your life. You cannot have a car without car insurance in case you get in a car accident. You do not think you will get in a car accident but it is so important because the costs could be tremendous. We buy insurance our entire lives. Nobody likes the thought of spending money on insurance to pay for an event that we do not think will happen. Nobody. Well, nobody until the event does happen and then we are tremendously thankful that we have the insurance. When you age, you will have unknown health care needs. It is really quite unpredictable. What makes it even more complex is that you may not be at full mental capacity to make all of your health care decisions. You may also be part of a blended family where it gets murky who cares for whom and with what monies. Or you may have a huge asset-base and be uncertain if your heirs will opt to spend less on your health care so that there is more money for them. There are many different types of long-term care insurance products that help you pay for health care costs as you age. Medicare does not pay for long-term care. Medicaid should never be relied on to pay for long-term care. Your options are basically your savings or a long-term care policy. There are long-term care policy options where you can get your money back if you need to or which provide a substantial death benefit if you never use the policy. There are policies where spouses can share benefits in case one needs it and the other doesn’t. There are policies that pay you cash and some which just reimburse you for the amount spent. Policies may pay for home care, assisted-living, and nursing home care. They can be paid for all at once or over a few years or annually like a traditional health care policy. They can be paid for with cash or with existing assets, like annuities or life insurance policies without causing a taxable event. You may never need long-term care but if you do it is really important to be realistic about how much it costs and how you are going to protect your loved ones from that burden. Health care costs are expected to double in the next 20 years. Be prepared.
Drawing from Retirement Savings
You have saved your entire life and have this money sitting somewhere and going up and down with the market. How do you actually live off of it? How do you best utilize your social security, pension, IRA, 401(k), and other savings to form monthly cash flow to pay bills and take vacations now that you are retired? Are there other investment options that you should consider? How do you help to maximize your investment dollars and still help to minimize the risk of it all going away if the market crashes or just goes down? Are you balanced enough to endure 20 or 30 years of retirement? What if you live too long? Life is a balancing act and retirement is one of the greatest of all of the shows where balance is critical and may be difficult. You do not know how long you will live. You have a set amount of money to live off of. You do not know if those investments will go up or down. You do not know if you will have tremendous healthcare costs or live a long life until you are 100 and die in your sleep at home. There are an infinite number of options and each one has a price tag. When you are younger you have more options to respond to life's hiccups – work harder, retire later, spend less. When you retire, your potential for income is unlikely to increase much, but your expenses may increase considerably. Talk with your financial planner about your options to utilize your savings and how to minimize the impact of the market ups and downs on your portfolio.
Does your family understand your financial and medical situation? Have you talked with them about where your investments are? Have you talked with them about your medical history/issues and your insurance coverage? Do you have a trust? Does your family know about the trust? These may seem like simple questions but often aging parents are not realistic about the reality that they are aging and may need help. They sometimes still feel that they are in charge and the decision makers, the strong ones and heads of the family unit, and resist depending on their children. They sometimes think that they are still running at full speed and are sometimes in denial that their memory or thinking is starting to deteriorate. A strong person will often become a very frustrating, stubborn aging adult. It is that strength that may help them live to 100 years of age, but also it is that strength that may keep the family members in the dark. It becomes important as you age to meet with your financial planner with your entire family. If nothing else, it helps them feel calmer. Your aging is emotional for them. They may feel lost with what to do when you die or need more care or are struggling with mental alertness. Including them when you can clearly communicate makes the entire aging process easier on them and you. Set-up a family transition meeting starting at age 75, or earlier if there are already medical concerns.