Financial Planning for the Nearly-Empty Nesters
Three Financial Planning Tips for the Empty Nest Years
A change in the “nest” situation at home naturally brings thoughts and questions about changes in your financial situation. As you reach this milestone of empty nesting (or near it), take a moment to consider what you may need to prioritize in your financial planning:
Maximize opportunities to save for retirement: If you’ve been steadily setting aside 10-15% for your retirement, you’re probably going to be excited to bump that number closer to 25% for the next few years. If you’re in your 50s, you can make catch-up contributions to your 401(k) for up to $23,000 annually. You can also open an individual retirement account (IRA) and contribute up to $5,500, or $6,500 if you’re in your 50s.
It’s also a good idea at this point to take a step back and examine your investment risk. Risk should be evaluated throughout your life and as you near retirement age. Is it time to determine a different level than you chose when you first entered the workforce?
Assess your insurance needs: Health insurance costs. Life insurance ins and outs. Long-term care insurance. While no one particularly enjoys these logistics, how you plan for changing insurance needs is an important part of your retirement planning. Take a moment to see what your advisor has to say about these concerns. (Remember, if you work with a professional, you don’t have to weigh all these options on your own.)
Plan for surprises: Sometimes … they come back. Your financial planning for the empty nest years should include a plan for how you’ll handle things if you need to support an aging parent or if a child returns to live at home. When it comes to a returning child, there’s a difference between a short-term stay for a young adult that needs a little help getting started and plans to stay long term. If they stay longer, how will you determine how much they should contribute to the household finances or upkeep of your home? Having this conversation means you can acknowledge their “adulthood” without compromising the plans you have for your investment portfolio. The same concept applies when an aging parent needs to join your household.
Life changes, and it brings … life changes. At each step, your ideas, concerns and plans can change, too. Our team at Lawson Kroeker Investment Management is diligent and focused, and we enjoy working with clients one-on-one. A well-grounded investment plan can help with these changes and the challenges they may bring.
Take a moment to learn more about our philosophy today. We look forward to helping you address life changes with confidence.
Planning for Retirement in Your 50s: What’s Your Vision, and Are You On Track?
If you’ve recently celebrated a milestone birthday of turning 50, then you may notice a few things. You may be more interested in activities that have meaning – or those activities that you just enjoy for the sake of enjoying them. You may be making regular visits to a child who is away at college. (You may even find yourself starting a lot of sentences with, “Kids these days…”)
What else comes to mind in your 50s? It’s normal to question whether your planning for retirement is on track, or if you need to prioritize making some changes as you head toward 65.
Planning for retirement isn’t just about the numbers; it’s also about visualizing the kind of life you want and making plans to support that vision. Maybe you can’t wait to travel to other countries, or maybe you’re excited to garden and read in your most comfortable chair. Both are great plans, and they require different strategies.
Accelerate your savings: When you hit 50, the IRS gives you a little more of a break on your savings plan. Instead of the typical $18,500 contribution limit for 401(k) plans, you’re allowed to contribute an extra $6,000 with the catch-up rule. This applies to traditional plans and to Roth 401(k)s.
While the rules for IRAs are a bit less generous, you can still put an extra $1,000 each year after you turn 50 into your traditional or Roth IRA.
Finding extra cash may not seem high on your “that’s fun to do” list, but it may not be all that challenging, either. It’s a good idea to try using a budgeting tool to see where your money is going. You may find that you could easily find extra savings in your budget with a few minor adjustments.
A few other key steps to consider:
Assessing your investment portfolio: A big change that comes in your 50s is that you need to examine your risk tolerance and make plans for when you expect to begin receiving distributions from investments. You may want to put some money in a fixed income investment so that you aren’t as vulnerable to the market swings that may affect your retirement date.
Getting rid of “bad” debt: Credit card debt interest is likely in the vicinity of 16%, often three times higher than a fixed mortgage or car loan. In addition, that debt doesn’t come with any benefits, such as mortgage interest deductions. There’s nothing wrong with enjoying the speedy convenience or the reward points a credit card can offer – but you might be surprised how quickly you could put extra money away for retirement if you’re not carrying a balance.
Planning for health concerns: The reality is that most people need increasingly more health care as they age. You also may want to consider long-term care insurance, particularly if you’d like to avoid asking family members to shoulder your care.
Investing in a Health Savings Account (HSA) is a good step because the money can be set aside, tax-free, for health-related costs. Any money not spent can be invested and grown until you use it.
Enjoying your 50s can mean a unique set of life changes, new decisions and new opportunities. You can really enjoy each of these changes with confidence if you feel like your retirement strategy is on track. Contact us at Lawson Kroeker to talk. We’ve been diligent, consistent and client-focused since our founding more than 30 years ago.