What should I be focused on? A look at financial planning milestones at various decades of a person’s life.
As we age our relationship with finances changes. From the early years of doing chores for an allowance to late-stage estate planning our goals for finances will be impacted greatly by our age and where we are in life. So, with that I wanted to lay out some financial planning milestones tied to where individuals are in life.
70s and Beyond: Golden years, transitions, and wealth transfer planning. Your 70s and beyond are the golden years of your life. To this point you have worked hard, saved, delayed gratification and now is the time to enjoy that effort. Here are some of the key financial planning topics to consider:
- Mindset shift. In order to get to this point most of your life has been focused on delayed gratification. Saving now for your own benefit in the future. Now that future has arrived, and it is time to shift that mindset. This is when you will be taking distributions from your portfolio rather than making contributions. This is a major mental shift that is not easy to process. Taking the time to understand that you sacrificed for years to get to this point will hopefully help free you to stop putting things off.
- Match income to lifestyle. The goal is to have an income that supports the lifestyle you want. Without the burdens of work many people spend more in retirement. That could be more travel, more activities that cost money or more money spent on a growing family of children and grandchildren. Ensure that your income stream is sufficient to match your spending needs.
- Match investment allocations to income needs. If you are taking distributions from your portfolio, then you want to ensure your investments are aligned with those distributions. This means you may want money in less risky assets, you may want money invested in income producing assets, and you may still want growth assets for future years. Match your portfolio to your goals.
- Finalize the estate plan. Where do you want your money to go when you pass. If you want to control where your money goes then you need to create a plan that outlines your wishes. Ignoring this planning will result in others making these decisions for you. An estate plan can involve anything from a will, beneficiaries on accounts, a trust or more. Take the time to get this accomplished. It will ensure your wishes are followed and will reduce the burden on your loved ones when the time comes.
- Plan for a medical event. If you have not already done so have a discussion with your family that outlines a plan in the event there is a major medical event. A major medical event could put a major dent in your own retirement plan, along with the plan of a spouse or your children. Discuss your wishes with your family and start to designate assets that can be used in the event something happens. This can include a specific account designed for medical expenses, a Health Savings Account, an insurance policy or more.
- Plan for the transfer of assets. In addition to your estate plan which outlines where your money will go when you pass, some choose to transfer assets while they are alive. This helps them see the money in action. Create a plan for gifting, charitable contributions and more if this is something that is important to you.
You have worked hard to get to this point. You have sacrificed, put other family members first and delayed gratification. Now that you are in your Golden years this is the time to start to enjoy the fruits of that labor. In order to do so, take the time to address the planning steps above. This should free you up to then focus on enjoying your retirement.