15 Sep 2016
Financial planning is a process. It occurs over the course of our lives and should reflect our changing needs as we age. Why plan? Studies have shown that retirees and pre-retirees who have a formal retirement plan feel more prepared for retirement; they have gauged how many years their assets will last and have a plan for generating income from savings. They’ve given thought to how they want to live and how to fund that vision.
Maximize in Your 50s
You are most likely still working and saving for retirement. You should be maximizing your 401K contributions, especially if your employer provides a match. And take advantage of your 50+ status with additional “catch-up” contributions to your 401k, 403b, or IRA.
- You may be funding college or drawing from a 529 college savings plan. Consider student loan options instead of drawing from monies that should go into your retirement savings.
- Review your asset allocation to stay on track with your goals.
- Work with your accountant, attorney and financial advisor to assist in comprehensive planning.
- Review life insurance policies and beneficiaries to ensure adequate coverage of obligations such as college tuition, mortgage payments and retirement for survivors.
- Review liabilities, such as your mortgage; consider refinancing to lower rates if applicable.
- Consult a trust and estate attorney or elder lawyer to ensure you have and are up to date with all the necessary advance directives. A health care proxy and durable power of attorney are essential components of a complete financial plan, as is a current will. Wills drafted when the kids were born are outdated and need to be reviewed every five years or so.
- You may be caring for both your children and your parents: look into the benefits and options for long-term care insurance.
Save in Your 60s
Congratulations! You may have paid off the mortgage and finished with the college tuition, enabling you to contribute even more to your retirement and investment accounts. Remember, your money may need to last another 25 to 30 years!
- Now’s the time to look at Social Security and think about when you will retire. Benefits become available at age 62 but increase at your full retirement age (FRA) and continue to increase each year until the age of 70. At age 65, you will qualify for Medicare benefits.
- If you have grandchildren, you may want to gift to a 529 college savings plan which provides tax and possible estate planning advantages.
- Downsizing or moving to maintenance-free living may also factor into your financial and life plans.
- If you are a business owner, begin to formulate a succession plan with formal buy/sell agreements in place.
- Review your estate plan and advance directives with your lawyer and tax attorney. Connect these professionals with your financial advisor to assist in updating your financial plan.
- If you haven’t already, determine how you will pay for long-term care in retirement.
- You’re considered a senior now. Look into applying for a property tax reduction in your area. Use the many senior discounts available to you: car rental, hotels, public transportation, movie tickets, even groceries and coffee!
Maintain in Your 70s
You are most likely retired or contemplating retirement. You may be travelling, golfing, volunteering or spending time with grandchildren. You are probably drawing from retirement assets, and taking the required minimum distribution (RMD) from your IRA (beginning at age 70 ½).
- Review your retirement portfolio to ensure you are on track to draw from your assets. At this point your investments should generally be allocated more for income than for growth. Speak to your financial advisor about arranging automated payments for ease.
- You may want to look at gifting options to reduce your estate. Consider trusts for estate planning. If you’re philanthropically inclined, talk to an attorney or your financial advisor about charitable trusts.
- Again, review and make any necessary changes to your advance directives and wills. Throughout these decades, you will want to anticipate your future needs and wants – and incorporate them into your financial plans. Continually review your asset allocations and tolerance for risk. Keep your family involved and informed. Stay connected with your financial advisor, accountant and estate or elder law attorney to ensure your plan remains on target to meet your goals. Finally, keep all of these recommendations in motion so you will be able to enjoy your retirement!
1 The Benefits of Retirement Planning, LIMRA Secure Retirement Institute, 2016
Life insurance, disability income insurance, and long-term care insurance are offered through Morgan Stanley Smith Barney LLC’s licensed insurance agency affiliates.
Amy Weiser is a Financial Advisor with Morgan Stanley Global Wealth Management in Stamford, CT. The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors or Private Wealth Advisors do not provide tax or legal advice.Morgan Stanley Smith Barney, LLC, member SIPC.