Ruth Mahoney, President, Capital Region, Keybank
For most people, the 50s are your power earning years. You are an expert in your field and valued at work, and your paycheck reflects it. Also, according to a 2014 study conducted by the Today show, you are more likely to be happier and less stressed than you have been in decades.
Sounds great, right? It is, but being in your 50s isn’t a panacea. Life is as hard as it’s ever been—maybe even harder—you’re just better equipped to deal with it. Unfortunately, the cost of dealing with it can be very real. Helping to finance your children’s college education, care for aging parents and/or provide a lift for your adult children can eat into your retirement savings. To compound matters, many professionals in their 50s have lost salary increases due to the economic recession. That’s why only 26 percent of Americans plan on a traditional retirement. The rest plan to continue working, even after their formal separation from service, which isn’t really retirement.
So what can you do to avoid this fate? It may sound like an oversimplification, but to become among the one in four who retire and live off of their savings is a matter of resolving to take charge of your finances. And no, it’s not too late . . . even at your age.
The ability to achieve financial goals always comes down to developing and executing a plan. To do that, you need to have an understanding of your complete financial profile. What are your current income, expenses, assets and liabilities? What is your cash flow? Do you have an existing financial plan? If so, how well are you executing on it, and does it still meet your financial needs and goals?
Several online tools can help you assess your financial health, including the National Foundation for Credit Counseling’s free MyMoneyCheckUp website. You can also work with your personal bank or financial planner. The areas you will want to review are budgeting and credit management, savings and investing, retirement planning and managing home equity.
According to Boston College sociologist David Karp, the 50s mark a turning point in the way people think about aging. Instead of evaluating how much time has passed, people start considering how much time is left. By extension, they start thinking about how they want to live their remaining years.
Establishing goals is how you take charge of your financial future. Do you want to retire early, at 62, or retire at 66? Do you want to be a snowbird? RV around the country? Help your grandchildren finance their education? Leave a legacy and support a nonprofit?
It is important to assess how achievable your goals are when measured against your current financial situation. Ask yourself if the life you envision is realistic. Then prioritize your goals and define what you need to do now, what needs to be done in the next two to five years and what can wait until after.
You can achieve your retirement goals in several ways. Here are seven financial resolutions that can make it happen.
The important thing is to never give up. Even if you’re behind schedule, you still have time to build a better retirement. In fact, you still have almost a third of your working career ahead of you. So be disciplined, set aside assets a little bit at a time consistently over time and hire a team of professionals—attorney, accountant, financial planner and investment team. The future you want for yourself may be more attainable than you realize.
Ruth Mahoney is president of KeyBank’s Capital Region. She may be reached at either 518-257-8619 or [email protected]. This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice.
Estate planning should be part of your retirement plan
Regardless of career and earning power, the reason most of us work is the same. We want to provide for ourselves and those we love. A well-prepared estate plan helps ensure this happens—even if something happens to you, and even if you are not rich.
Estate planning can be an all-inclusive, tax-saving financial plan for the preservation of your assets when combined with savings, investments and retirement; the protection and continued operation of a business; the support and care of your children; and much more.
To develop an estate plan that is best aligned to your interests, you should work with a reputable lawyer, skilled fiduciary specialist and other professionals who have experience and expertise in wealth transfer planning, custom trust solutions, trust administration, estate tax minimization, power of attorney/living will, document review, beneficiary designation, titling of assets and real estate management services.
Here are some basics that should be covered in your estate plan:
- A will. This is a written document that provides for the transfer of your property upon death.
- Assignment of power of attorney, which gives the person you name the authority to manage your financial affairs if you are unable to do so.
- Beneficiary designations. If you have not named a beneficiary of your estate, a court is empowered to manage your possessions.
- A letter of intent, which specifies to the beneficiary how you want your affairs carried out after your death or incapacitation.
- A healthcare proxy that authorizes another person to make medical decisions on your behalf.
- Guardianship designations. As is the case with the distribution of your assets, you do not want the court making decisions about whom your children will live with after your death.
When reviewing this list, it becomes very clear that estate planning is not just for the wealthy. In fact, a child with a savings account technically has an estate, because an estate is nothing more than possessions of value that can be transferred to another individual or entity upon death. So essentially everything you own—property, bank accounts, investments, business interests, retirement benefits, IRAs, insurance policies, fine art, collections, jewelry, clothing and other personal belongings—comprises your estate. An estate plan determines to whom and when the proceeds of your estate will be distributed in a way that maximizes the value of the estate by minimizing and reducing taxes, liability and other expenses.