Financial Planning Tips for 50-Somethings

A couple of months ago I turned 50. Most of us look at a new decade as an opportunity to assess where we are in life and make some plans and goals for the next decade. For me, aging has made me look both ways: backwards and forwards. I looked at what I’ve accomplished and looking forward to the next 50 years, I asked myself what else I want to accomplish. For many people, including me, those goals include increasing their financial wellness. Here are some of my financial goals for the next decade:

Fund Kid's College Education

That means saving money regularly in a 529 account to pay for college which will help take the sting out of those tuition bills and make it easier for them in the future. I was fortunate enough to come out of college debt free, thanks to my parents. I want to make sure I can pay it forward to my children. (For related reading, see: 6 Financial Benefits of Moving Into Your 50s and 60s.)

Save Enough for Retirement

I don’t have a date in mind, but I do know I am closer to retiring now than when I turned 40. A few simple things that I have been doing for many years and will increase going forward include:

  • Maxing out my 401(k) plan.
  • Right now I put half of my contribution into a Roth 401(k) so that when I start to withdraw in the future, my withdrawals come out tax free. I liken this strategy to now and later, paying a bit more taxes now for a tax benefit down the road.

Spend Less Than Earned

Sounds simple but it’s tough to do. I pay attention to what we spend our money on and every year try to make some smart investments that will benefit my family many years down the road.

Manage Risk

This takes several forms including:

  • Life insurance: I have it and enough, so I just make sure the policies are sound and in good shape.
  • Liability insurance: I have an umbrella policy to protect my nest egg. If someone slips and falls on my property and they sue me, after my homeowner’s policy my umbrella will take over. I don’t want a simple accident to derail my retirement.
  • Disability insurance: I maintain it through my employer as they offer it as a benefit. If they didn’t I would get it on my own.
  • Long-term care (LTC): While not a must at 50, it’s something to think about in the next five years or so. An LTC insurance policy covers you or your spouse should you need continuing care and/or assistance in activities of daily living.

Maintain Asset Allocation

While I am involved every day in managing my client’s money, I also take care of mine. I do it in the same disciplined way that I recommend to my clients. I use outside managers, mutual funds and other investments so I can focus on the big picture and not get bogged down in the day to day minutia of making every trade. I know over the long term having and maintaining a prudent asset allocation will provide the risk management that I need to maintain and grow my nest egg.

Update Will and Trusts

I updated mine a couple of years ago so I feel comfortable that my paperwork is in good shape. But if I had not, this would be high on my agenda to tackle this year. This includes the following initiatives:

  • Will
  • Power of attorney: Provides a person legal authority to manage my affairs if I become incapacitated.
  • Healthcare proxy: Designates a person who can make decisions on my health if I am not able.
  • Advance directives: Designates who gets to pull the plug. In my case my wife has full power over the above along with a couple of close friends who I have complete trust in to help her out and take over if she cannot. I know that no one likes to think about this, but it is critical if you care about your family. Don’t ignore it because you don’t want to deal with your mortality, do it because you love your family.

Relocating 

Right now, my wife and I are involved in various organizations that make our community a better place, be it donating our time, treasure or talents. We plan to move somewhere else at some point in the future, so I want to start thinking about our future community now. What do we need to save in order to relocate? If we decide to move to a retirement community there will be additional costs. You may have a different view of your future, but finding a community that will satisfy your social needs and your physical health is important. Plan to make sure you can afford the cost of establishing yourself there.

Turning 50 is a major milestone. Consider what you want to accomplish in the next decade and put a plan in place to meet financial goals. (For more from this author, see: How to Balance Retirement and College Savings.)

 

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