This month’s column will complete a series of recommendations to readers about the importance of considering age as a factor when setting goals to reach financial security at different life stages.
For those readers between 50 and 60 years old, it is never too early to start crafting plans for retirement, nor is it never too late to change behavior if you have not started to consider it. In the past week alone, I listened to comments from friends and associates in this age range:
“I don’t want to work past age 65; I am going to take social security and live off of that!” When pressed for details about his full retirement age and what amounts he will be entitled to — he did not know.
Upon learning that I was an investment consultant, a healthcare professional asked me: “Do you have any tips for me?” When I asked if he had a retirement plan he said, “Yeah, it’s with some group in Indy, I don’t know what they do with it and I don’t look at it. I just let it be, but not sure how it is invested.” I was left wondering why he wanted a tip.
This month’s advice is to stop avoiding planning for the stage in your life that can be the most relaxing and satisfying. Start now by following these simple steps:
- Investigate whether you will qualify for Social Security benefits by visiting ssa.gov/retirement. This website has excellent resources which should be able to answer any questions you might have. How much monthly income can you expect given various scenarios?
- Make sure that you are contributing as much as possible to your employer’s retirement plan and focus specifically on contributing enough to receive the employer match. If you have a spouse, suggest they do the same.
- Review other potential resources such as pensions, real estate income, annuities, etc.
- Once the information is gathered, have an open discussion about your findings and determine if the combined income from Social Security, retirement plans and other resources will be enough to fund your annual living expenses during a retirement that might last several decades. If not, come up with a more realistic savings plan by using online calculators or seek guidance from a financial professional.
- As advised at all stages of life, make sure you have adequate savings for emergencies, but in addition, try to accumulate savings that will allow you to keep assets sheltered from income and capital gain taxes as long as allowed by law within tax-deferred accounts such as 401(k)s and IRAs.
- Reconsider the purpose of life insurance. At this stage of life, it’s possible that you have accumulated enough assets that providing a benefit to someone else at your death is not as necessary as when you were younger. If the annual premium to continue the policy is a big portion of your expected retirement income, letting the policy lapse might be an option, especially if it is a term policy.
- If you have multiple bank and savings accounts, try to simplify your financial picture by combining these accounts into just a couple. If you have retirement plan balances lingering at a previous employer(s), also consider combining these monies. Set up a rollover IRA with a brokerage firm such as Charles Schwab or Vanguard and roll the account(s) into it. This will require doing some homework, but the long-term benefits can be great if you do the exercise now.
ACTION ITEM: Complete the steps outlined above now and commit to improving confidence that you can retire comfortably by investing the monies wisely.
Beth Stegner Peabody is CEO of Stegner Investment Associates and a graduate of Sacred Heart Academy and St. Agnes School.