Determine what your highest deductible amount is. Review your home, auto and health insurance policies to learn what your highest deductible amount is. Once you know that amount, save that up in your Emergency Fund and move to the next step.
At this stage you are either retired or you’re nearing retirement. Some of the most important decisions will need to be made at this point. When do you take Social Security? What options should you take for your pension? How do you prioritize your assets for income? What do you do about Health Insurance? There are decisions that have to be made that don’t have to be made without help or proper education.
We’ve outlined some simple concepts and a guideline you can use to help you with these decisions. These are important things you need to understand and some easy-to-follow principles to help you.
Budgets and Debt Management
The first core principle you need to understand is cash flow and how to create a Budget. You can’t truly get ahead and tackle your finances unless you fully understand where your money is coming from and where it is going. There are multiple tools and resources you can leverage to help with budgeting. Simplifi and Rocket Money or options that help you automate the process and sync with your accounts. You can also use a simple Excel spreadsheet or the attached to help track your expenses.
Debt Management is essential in helping your cash flow especially in retirement. Debt increases the demand on your income. Simple concepts such as “living within your means” is the best way to manage debt. Simply put, if you can’t pay cash for it, can you really afford it? Ideally, you’re debt free at this point.
Family Planning and Protections
Is Life Insurance a requirement or need at this point? Typically not. At this point you’ve accumulated enough assets so that in the event of your passing, your family is protected. Life insurance can be still be purchased for certain goals or needs. For instance, maybe you have money set aside that you want to leave to your kids or grandkids? Or maybe you’d like to cover funeral expenses?
These policies are typically more permanent in coverage such as Whole Life or Universal Life policies. There are all sorts of features that come with this policies. But they can be very difficult to understand. Working with a financial advisor, not a life insurance salesman, may be in your best interest. We can educate you on the pros/cons of each to help you determine whether these policies are necessary for you.
The other type of insurance that becomes important to consider is Long Term Care Insurance. One of the biggest hits on your assets can be the expenses associated with nursing home facilities or in-home care. For some people, leaving it up to Medicaid to cover the costs is acceptable. For others, having more options and control over your care is important. That’s where a Long Term Care policy can help. There are stand-alone policies and hybrid policies that combine LTC with life insurance. We can evaluate your options to help you find the product that suits you most. For more information, please visit here.
Financial and Retirement Planning
Where do you start now? You start with a Financial Plan. Creating a plan for your retirement is crucial in making sure you have the lifestyle you want while helping you manage the concerns of running out of money too soon.
One of our team members can sit down with you and your spouse to build your game plan tailored just for you. A financial plan can illustrate cash flows, inflationary increases in expenses, tax strategies and even estate planning. We can even add goals to your plan such as buying a retirement home, traveling, or buying a vacation home. If you’re ready to create your plan now, please visit the link below.
Most people reach a point where they’ve amassed enough assets in their 401K’s, Roth IRA’s and Traditional IRA’s and they’d like to retire. They’re also looking to simplify their finances. That’s where it may makes sense for you to consolidate your assets to one or two accounts. This makes things easier for you, your spouse and your children in the event of an unexpected passing. The Financial Plan can help you make all of these decisions.
Social Security and Medicare
You’re 62, should you take Social Security immediately or should you defer it to age 70 where it maxes out? That’s a difficult decision to make. Some questions to consider include:
- What is your current health condition?
- Do you have a family history of a long lifespan or short lifespan?
- Are you going to continue to work while taking Social Security?
- Do you need to take your benefit immediately to pay for expenses?
If you aren’t sure about the impact of Social Security on your plan, having a Financial Plan in place can help with that. Our team is here to help you navigate this decision. We’ve outlined more information and details about Social Security here.
At age 65, you qualify for Medicare. Prior to that, what is your plan for Health Insurance? Once you enroll in Medicare, most people need to purchase a Medicare Supplement or Medicare Exchange plan to help cover the expenses that Medicare alone doesn’t cover. Working with someone who is well-versed on what your options are and how it affects your family is paramount. We’ve partnered with great professionals who can help you review your options and choose the plans that best suit your needs.
Financial Steps
1 - Immediate Savings
2 - Employer Match
3 - High Interest Debt
4 - Emergency Savings
5 - Retirement Savings
6 - College Savings
1 - Immediate Savings
2 - Employer Match
There’s nothing better than free money when you’re looking at overall financial health. Understand your employer sponsored retirement plan and always contribute at least the full matching. Most employers will match a portion or all of your contribution up to a certain percentage of your salary. Take full advantage of this!
3 - High Interest Debt
Aggressively attack your high interest debt and eliminate it as soon as possible. This could be credit cards, HELOCs, car loan, personal loans and student loans. Eliminating these debts will free up your cash flow to help you invest a portion of your income.
4 - Emergency Savings
Now you’ve eliminated your “bad debt”, you can focus on creating your Emergency Savings. Once you’ve determined what your monthly expenses are, you want to set aside 6x that amount and put it in your savings or a money market account.
5 - Retirement Savings
Your goal should be to try to save 20-25% of your income in your retirement accounts. Whether you are leveraging Roth IRAs, employer sponsored plans or simple brokerage accounts, the quicker you can get to that 20-25% threshold the quicker your money is working for you!
6 - College Savings
After you’ve reached that 20-25% threshold and you’re on your way to building your assets to secure your retirement dreams, THEN you should consider leveraging a 529 plan, UGMA/UTMA, or a general brokerage account for your kids or grandkids.
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