Do You Know the Risks and Opportunities of Your Last Decade of Work?
The risks of your last decade in the workforce may be some of the greatest of your career. Yet, more often than not, we see people trying to coast to retirement without proactively doing anything. At best, this results in lost opportunities- at worst it can be their undoing. Here are a few examples:
People take their job for granted. Companies are under pressure to build profits and grow. It is not uncommon for them to “reorganize” and often that comes at the expense of the employees with the most seniority and the largest paycheck. People need to keep their resumes and their networks very active so if they lose their job, they can get one that is at least as good. Proactive work here can pay off big time!
Health insurance is forgotten during planning. Health insurance is not a guarantee, and with the political tides especially volatile right now, for those who aren’t yet qualifying for Medicare this can be a make or break issue. It needs to be considered with planning, even if one spouse continues to work- what if they lose the insurance? What is Plan B?
They ignore the need for planning for Long Term Care. The challenge with this pre-retiring stage is you may not have seen what happens to someone who needs long term care up close and personally yet. If you haven’t seen it, you probably don’t know how bad it can be for people who didn’t prepare. Wait another decade and your choices become limited as far as looking at different types of plans and carving out one that may be affordable to you.
They have no liquidity built up. If you are over 55, you should have a years worth of living expenses outside of your retirement account in a savings account, in our opinion. If you don’t, you are asking for trouble in an emergency or in case of a job loss. While this is critical for people retiring before 59 ½, it’s also important for those over that age.
They aren’t thinking logically about asset allocation and their risk tolerance. We see people regularly who have moved their portfolios into positions that don’t make sense for them personally because of internet research or advice from someone who doesn’t know them from Adam. If you don’t have an investment policy statement for yourself, you need one now.
They have ignored tax planning. Ditto here from asset allocation. 401ks are wonderful tools- but there are now multiple ways to use those, as well as other ways to hold assets that help a lot for tax planning in the future as well as for right now. If you aren’t thinking about taxes in retirement now, you may be missing a big opportunity for yourself.
They waste their Peak Earnings. This is the most painful to watch. Here you are after all of the struggles in your life and you are now making “bank”. Yet, instead of putting away for yourself, you may be like most people and just increase your lifestyle. This cuts you two ways- one, you miss the obvious extra savings opportunities giving you flexibility should you lose that gig, and two, if your nest egg isn’t big enough you end up having to cut that nicer lifestyle back even more than you would have before you got used to it. People SOB when they realize this has happened to them.
The last working decade can make all the difference in your retirement and elder years. Stay on top of your planning like never before and you may reap big benefits instead of suffering unintended consequences.
92% of millennials believe being educated on personal finances is important. (CSpace/Journal for Financial Planning)
Your Biggest Risk May Be Your 20 Something Children
By Stephanie Guerin, CFP®
When they were born, you just wanted them to grow up happy and healthy. By the time they were teenagers, you just wanted them to not live in your basement. Parenting goals change! But the kiddos have made it to their 20s and you are free, free, free, right? Not so fast. You still need to launch these kids the right way. Here is a quick checklist of what they need so they don’t come back to the Bank of Mom and Dad, or worse, take you through bankruptcy!
- Get their Powers of Attorney completed.
- Encourage them to set up a savings account (emergency fund) and contribute to it.
- Make sure they have health insurance- you may even need to contribute to it or provide it.
- If they are working, encourage them to sign up for disability insurance.
- Strongly suggest they lock down their credit.
- Review their student loans and debts with them regularly- especially if your name is on them as a guarantor.
We have great resources for our client’s kids- don’t hesitate to ask us for help!
“Youth would be an ideal state if it came a little later in life.” ~ Herbert Henry Asquith
Market Update: Red Hot Summer Drama
6-30-18 YTD Dow -.7%
6-30-18 YTD S&P 500 2.6%
6-30-18 YTD World EX US All Cap -2.6%
6-30-18 YTD US Agg Bond -1.6%
Feel the excitement out there? Between tariffs and trade wars, elections and appointments, monetary policy and unemployment- things are wild in government and finance. The question will be if any of that will matter in the market in the short term that spooks investors enough to move the market significantly one way or the other. As always, we encourage people to have liquidity and buy the best quality they can find for the lowest price- and hold. Movement in the market is to be expected always, but changing your portfolio based on speculation is, in our opinion, a fool’s policy.
The views expressed represent the opinion of The Planned Approach. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. While The Planned Approach believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and The Planned Approach’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties.