Limited savings but numerous responsibilities. That’s the life. But some of these responsibilities will run parallel to each other. For example, at the age 50 years or so, while you can’t delay saving for your retirement, you can’t afford to ignore our child’s future either, may be his/ her college education or the impending marriage. Further at this phase of your life, you don’t want financial mistakes to derail your retirement game plan. But these financial dilemmas and the responsibilities change during the different stages of life and accordingly the financial priorities also change. To restrict ourselves to the life after 50s, the financial dilemmas can be : —
50s : Child’s Higher Education And Retirement : —
The deadlines of these two big goals may collide. While neither can be ignored, financial planners say that your retirement corpus is the Priority. Your child can get a scholarship or take a loan. However, the bank won’t extend you a credit because you don’t have sufficient savings post retirement. Even if they do, a personal loan will always be costlier than the education loan.
“ An education loan creates a sense of financial responsibility in the child; allows you to keep your assets and gives you additional tax benefits”Some may also argue it is better to work longer and save more than depend on an educational loan. But it all depends on your health and other circumstances.
60s : How And Where To Keep Your Kitty : —
At this age, this is the big financial dilemma. Your financial resources are getting limited and you have to meet responsibilities after meeting the adverse effect of Inflation and various taxes( federal and state ). So, you may keep moving your investments earmarked for retirement towards debt fund as you near 60s. However, that should not stop you from re-investing your kitty in equity options. Considering they are your best chances to beat inflation, most experts recommend keeping a portion of the nest egg in equities. Depending on your Risk taking capacity and availability of fund, you can invest 15- 25 percent in equities to beat inflation and tax liabilities.
Important Money Moves : —
To manage your finances and savings as well as plan for your future post retirement is very important at the age of 50 years or so. If you’ve been procrastinating on money matters so far, now is the take- control moment for you and your finances. Some of these financial moves or steps which would help you to keep your next years of life financially sound are as under : —
1 Speed Up Paying Down Debt/ Loan :–
Repaying of your debt, especially high interest carrying loans or debts like credit card balances, car loans etc. has been emphasized repeatedly in my earlier posts. You don’t want to be dealing with mounds of debt as you work those last few years before retirement. Calculate your current debt load and start paying off larger debts as soon as you can. This includes any includes any car loan, large credit card balances , personal loans and mortgages, that you’ve been carrying around for a while. Most retirees who own their homes free and clear will tell you living without a mortgage is financially liberating. The higher the interest rate, the stronger argument for paying the debt off sooner.
2 Look At Your Life Insurance : —
The American Council of Life Insurers recommends having life Insurance coverage of seven to ten times your salary. But this is a broad rule of thumb. Actually your life insurance coverage depends on your own individual financial needs which may vary greatly based on various factors like : —
_ The amount of Debt/ Loan you would want paid off
_ How much money you’d want to leave for your dependents
_ Any other financial commitment .
But the need for life insurance doesn’t end when you attain the age of retirement/ superannuation.
3 Long – Term Care Coverage : —
Buying long term care while you’re healthy is way easier at age 50 than, say, at age 70 or 75 years. For example , a man or woman buying a long term care policy at age 50 could pay an annual premium of $3,302. But delaying the purchase for a decade would cost the same person $6,678 annually which would become $17,760 annually if you buy at the age 70 years. As with life insurance, long term care coverage can vary greatly based on where you live, family history and the duration of the coverage.
4 Don’t Put All The Eggs In One Basket : —
At this phase of your life, you don’t want financial mistakes and which are related to your Investments– to derail your retirement game plan. Better diversify your portfolio. Make sure you’re not investing all of your savings in just a single account or investment vehicle.
If you have investments, review them now- or have a money manager do it- to make sure you have a truly diversified portfolio. After age 50, you also want to reap the greatest possible return from your investments as these may be your highest income earning years and the time when you have the most potential to stock away money.
Ahead of retirement, the goal is to start adjusting your investment risk a bit, while maintaining the opportunity for steady growth in the upcoming years. As you get closer to retirement, the diversification of your portfolio becomes even more important. So, having the right mix of stocks, bonds and cash is essential. In this regard, the investment professionals offered general rule of thumb like “ Take the number 100 and subtract your age” . The remaining number would suggest how much of your portfolio should be invested in stocks.
5 Finalize Your Will, NOW : —
It is time to create or update your last Will. This can be done in many ways _Pay a lawyer to create a Will.
_ Use Online software like Legalzoom.com or Nolo.com
_ Use store- bought forms that contain pre-printed Wills.
Unfortunately, nearly half of all the Americans over the age of 50 don’t have a basic Will, according to various survey reports.
CONCLUSION : —
Getting the help of a financial professional can get you on the right track and help ensure that you take care of these essential financial tasks. But we must not delay to plan our finances any further. Having sufficient Insurance coverage, both Life as well as Medical, is of utmost importance.