I always tell friends and clients that the best time to start financial planning is now. It’s never too late. Good planning will help you maximize your options and reduce the risk of financial surprises, at any age.
But, over the years, I have found that most folks start to get serious about financial goals like retirement around age 55. For many families, the kids are done with college, or nearly so. And for many of us born before 1970, we think of the age of 65 as “retirement age.” When we were kids, many people retired with a pension at 65. So, that’s in our heads.
Today, most folks don’t have pensions, so retirement could be at any age. Which is great because everybody gets to choose. But it can be a challenge because the responsibility is on each family to be sure they make good choices.
This is why I feel so strongly that every family considering retirement would benefit from a visit with an experienced, highly-trained, CERTIFIED FINANCIAL PLANNER™ professional and Behavioral Financial Advisor in West Saint Paul, Minnesota. I love to meet new people. So, follow this LINK to find a time for us to have a get-acquainted visit.
But, Is It Too Late?
Age 55 is NOT too late to start your financial plan or seriously review your existing plans. Think about these facts:
- Most Americans aged 55 today can expect to live for about 25 years. (Men age 55 – 27.5, Women age 55 – 30.7, according to the Social Security Administration Life Expectancy Calculator). And the odds of one partner in a couple aged 55 reaching age 90 are better than 50-50.
- Many people choose to work past age 65.
- They like the work.
- They like the money.
- They get satisfaction from the work experience.
- If you have good health and work that you enjoy, it’s not surprising to think about working to 70 or even 75. So, you could have 20 years to accumulate and grow retirement money to provide for your needs when you stop working for money.
- A prudent investment portfolio could double every 11 years.
- Assuming a 6.5% average growth rate.
- That means that in 22 years, $100,000 could grow to $413,000.
Age 55 is a great time to seriously reflect on what you WANT your “retirement” to look like. I often discuss with my clients the three key choices in the retirement journey:
- When to stop working the BIG job? This job pays well but might be stressful. It might NOT allow for the flexibility you prefer.
- When to stop working ANY job? After the BIG job, you might consider consulting, or a part-time or hobby job that allows you to earn some income but have more joy and more flexibility.
- When to start drawing on retirement savings? Just because you change jobs or reach a specific age does NOT mean you must begin drawing on your retirement savings. Careful planning around this process can make a big difference.
- Beginning Social Security at age 62 is possible, but it means about a 50% reduction in the amount of total benefits the typical person receives.
- Beginning Social Security at age 70 means your benefit is as large as possible. And that larger base will grow with annual cost-of-living adjustments.
- Some of your retirement money might be available before age 70 to bridge the gap to Social Security.
What Should I Do Now?
A great place to start is to take stock of where you are. Here are some questions to answer:
- What is my projected Social Security benefit at full retirement age? Check at www.ssa.gov.
- What are the current balances in my retirement accounts?
- 401k at the current employer.
- 401ks at old employers.
- IRA (traditional and Roth)
- Inherited IRAs from family.
- How is my retirement money invested? Will it grow fast enough, and will it be safe?
- How secure is my current job? Do I love it? What work would I like to do next?
- How is my health? Do I have chronic health conditions? Do I have relatives who died young, or lived long?
- What does a week look like after I am done working for money?
- Where do I want to be?
- What do I want to do?
- Who do I want to be with?
- What do I think it would cost today?
You might find that some of these questions are daunting. That’s OK. This is a great and wonderful phase of life. It IS a big deal. And, maybe, you would benefit from some fiduciary advice from an experienced and well-trained financial planner. If so, I would love to visit with you. Follow this LINK to find a time that works for you. We can take a few minutes to get to know each other and maybe I can help you decide what you want to do next.
I am a financial planner who is an advocate for my clients all the time—a fiduciary financial planner. I provide guidance based on clients’ best interests, not commissions or sales quotas. I think it’s the best way to serve clients and I am thrilled to work this way all the time.
And yes, I’m still taking on a few great families to be part of my financial planning practice in West Saint Paul, Minnesota, and, thanks to Zoom, across the country.
Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.