Financial Planning for the Young and the Young-At-Heart

Sandra Moeller |
Categories
 

Turning 30 can be a wake-up call.  Approaching retirement can be unnerving.  Taking control of your finances can take some of the weight off of your shoulders!

3 Goals Every 30-Something Should Have

30 can be a divisive number.  To the young, it’s the time when you’re thrust into full-blown adulthood, whether you’re ready or not.  To the young at heart, 30 may be considered the early years before your true confidence started to shine in your career, in your relationships, or even in yourself.  Either way, your 30s are an incredible age when you’re comfortable with a bright future ahead.

The same can be considered for your financial planning.  By thirty, debts should be under control or non-existent.  But, just because your ‘fun fund’ is growing doesn't mean it should be spent!  Most financial professionals agree that this age is the perfect time to start tackling these three financial goals:

1. Retirement Goals

Yes, we’re talking retirement savings planning, again.  A great article by Forbes covers 7 commandments a 30-year old should make from a financial standpoint.  One of their primary decisions revolves around how accepting a job offer can severely impact your retirement future.  “A 30-year-old who doesn't carefully research his or her benefits and chooses to work for a company with no company match or retirement contribution could be way behind someone who works for a company with robust benefits.  For example, a 30-year old making $75,000 a year who saves 10% of his or her income in a 401(k) and earns an 8% average return would have a balance of just under $600,000 at age 55.  Compare that to a 30-year old who saves 10% at a company that matches 5% and adds a profit sharing contribution that averages 5% a year.  He or she would have almost $1.2 million in their retirement account—double our first example’s amount—at age 55.1

2. Emergency Fund

Even if your money is tight, it’s crucial to plan for an emergency.  After all, you’ll never know when an emergency might come out of left field.  Nerdwallet suggests, “Start by aiming to save enough to cover three months of your household expenses then gradually grow your emergency fund to cover at least six months of expenses.  If money is tight, building an emergency fund can be overwhelming, so start small.  Contribute an hour’s worth of wages each workday and gradually increase it to two hours’ worth of wages per workday.  If that’s unrealistic, save $50 per week ($200 per month) and increase it to $75 a week or more as you are able.  Use automatic deposits to your savings account to ensure regular contributions.2

3. Major Purchase

Finally, your thirties are an amazing time to start planning for some major purchases in life.  Whether that’s a new car or a new home, always try to look at the bigger picture.  Short-term sacrifices can lead to a long term gain when you’re lying on the beach in Mexico after you’ve saved up for that big family vacation!

 

Resources

1. http://www.cppr.in/archives/setting-an-ideal-retirement-age/

2. http://www.cnbc.com/2015/06/18/why-greeces-pensions-are-key-to-the-debt-deadlock.html

 


Is 'Freedom 55' An Option Anymore?

Have you ever stopped to wonder why 60 is considered retirement age?  Some public services - like the police force or fire departments - require you to stop working at 60.  For most people, retirement age, which traditionally varies from 60 to 65, simply refers to when you’re entitled to receiving your pension plan.1  Thousands of man-hours go into determining what the appropriate age is to allow for citizens to get support from the government.

Although it may seem like an arbitrary age, retirement age is a highly-debated topic and can be the tipping point for financial crisis - i.e. Greece, pre-financial crisis had an extremely generous retirement policy with a whopping 17.5% of total GDP being paid to retirees in pension funds.2  And as I’m sure most of you have connected, the retirement issue has been touted as a prominent reason for the financial difficulties faced by Greece and its citizens.

But remember back before the turn of the millennium when ‘Freedom 55’ became a phrase used by banks and financial advisors alike to talk about taking control of your financial freedom and retiring early?  Is Freedom 55 a possibility for the average person?  With the likelihood that pensions will only be available at a later ages, as life-expectancy increasingly grows, and as the cost-of-living is getting higher than ever before, it seems like the dream of early retirement might be a thing of the not-so-distant past.

As long as Freedom 55 is seen as the exception, not the norm, the principle behind the idea should be celebrated to help plan and save for early retirement.  Like many goals, sometimes with time they have to be adjusted to your socio-economic position.  Below are a list of financial tips which are key to meeting your retirement goals:

Live below your means

Sounds simple right?  But by not trying to, ‘keep up with the Joneses’ and instead, living contently with what you've earned can save you big money in the long term.

Start early and be realistic about your current financial situation

Track every penny spent to accurately set retirement goals and benchmarks needed throughout the process.

Focus on debt well before you stop working

Riding mortgages and debt is often touted as a way to free up financial chains.

Think about the other side of retirement, hobbies!

It may seem like a dream to no longer have the pressure of a career looming over your head, but many find purpose in jobs, and find the transition stressful, detrimental to their mental and physical health.

 

Resources

1. https://www.forbes.com/sites/nancyanderson/2013/09/26/7-financial-decisions-made-in-your-30s-that-may-haunt-you-in-your-50s/#70d961e83d42

2. https://www.nerdwallet.com/blog/finance/7-financial-steps-take-30s/

3. Photo by Mohamed Hassan via Pixabay

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2021 Advisor Websites.