Don’t you hate it when you Google financial planning tips, and it spits out articles that don’t apply to you? This could be because you’re a different age than the article is directed towards or you’re in a different position.
Well, look no further. I’ve created a rough outline of how you can plan, regardless of your age or situation.
But I’ll be honest with you, a lot of this article will link to resources or previous articles that explain these topics in more detail, but I wanted to create a rough outline of how people in different age groups can plan.
Ideally, you want to get a budget started, but nobody likes doing that. Instead, give your money a job. Figure out when you would like to have your debt paid off, then do the math to determine how much per month you need to pay.
List that payment plus housing, transportation, food, and other bills. That total tells you how much MUST go out, everything else is extra to do what you please.
In terms of saving for retirement, you have a lot of time to put money away, but if you start sooner, you’ll have to save less later. 10% of your salary is a good goal. If you can’t get there just yet, save what you can, but try to incrementally increase it over time.
Investment allocation here, as well as in your thirties and forties, should primarily be stocks. Not 100%, but definitely the majority of what you own.
The financial plan in your thirties is similar to the one in your twenties. Pay down debt and save for retirement. However, at this point, you probably have more assets and you may have some children as well.
With the cost of tuition constantly rising, saving for their future education costs is important. The 529 is the most popular, and probably the best vehicle available to do just that. (Be advised: 529 plans do involve risk so please talk to your financial advisor prior to investing)
With more assets and children, comes more insurance. Make sure your property and belongings are adequately protected. Additionally, if your children depend on your income for support, life insurance and disability insurance are a must!
Same story, different decade. Pay down (off) debt, save for retirement, and make sure you have adequate insurance. (Honestly, the save more, pay down debt, and have insurance is a great catch-all financial plan).
At this point, however, your retirement plans should become more detailed and concrete. Through your twenties and thirties, retirement planning essentially was just saving for retirement.
Now you should think about where you live and what you’ll do. You should also calculate if you’re on track and increase your savings if you’re behind.
Hopefully, by the end of this decade, your debt will be mostly paid off, you have a good idea of what retirement will look like, and you’ve determined what needs to be done (if anything) for you to hit your target number.
As you age through your fifties, you should start thinking about adjusting your investment allocation. You don’t have as much time to gain back what you lose during a down market.
Reallocating to a 60/40 or 50/50 (stocks/bonds), depending upon your risk appetite, is a good way to reduce your risk and still participate in a bull market.
Where you are at this stage in life depends on a few factors. Have you saved enough to live comfortably in retirement? Do you enjoy what you do? Are you healthy? Plans for Social Security?
If you haven’t saved enough, then you’ll probably have to work a little longer so you can save more. If you like what you do, then why not continue if you are able? If you don’t, consider a career change or (if you’ve saved enough) volunteering for a cause that’s meaningful to you.
If you are healthy, I recommend staying active and social as long as you can. Activity and a healthy social life are two of the three important variables for a fulfilling retirement.
Social Security and when to receive it is a huge decision. Obviously, I’m going to recommend waiting as long as you can so you receive a higher monthly benefit, but there are other things to consider.
Are you healthy? What’s your family history like? Do you have adequate savings/retirement income from other sources?
Health and family history help determine longevity. Poor health and/or poor family history may give you a reason to start receiving earlier.
There are calculators out the web (like this one here) that can help you discern what’s the best strategy for you. That’s to say, how do you optimize your Social Security and other retirement income so you receive the most possible?
We’re living longer, healthier lives now, and down the road, the retirement age will probably make its way into the seventies.
If you have to work for the income, you’re not alone. As of 2017, the percentage of the population that are 70 or older and still working was 19%. Up from 11% in 1994. (Source)
My recommendation. Develop an income strategy that will a) afford you to live a somewhat comfortable lifestyle (obviously, cutbacks are necessary if money is tight) and b) help your savings last as long as possible.
There are a variety of calculators out there to help figure this out.
Financial planning is tough. As I said in the beginning, not many like to budget, so it’s important to give your money a job. $100 goes towards emergency savings, $1,000 to retirement, and $250 for debt repayment.
Do this, along with several of the other items I listed (as well as the ones linked below) and you’ll do just fine.
Helpful articles and resources: