Balance. Confidence. Clarity.
Perhaps Bette Davis said it best when she observed, “Old age is no place for sissies.” ¹
The challenges seniors have met throughout their lives have made them wiser and stronger, preparing them for the unique challenges that come with aging.
As we age, the potential for cognitive decline increases, ranging from simple forgetfulness to dementia. Long-term illness can sap time and energy from tending to your financial affairs in retirement. Even a decline in vision may make it harder to manage your financial affairs.
Fortunately, you can plan ahead to protect yourself and your family against the financial consequences of deteriorating health, and in many cases, insurance may play an important role.
Let’s examine some of the ways you can employ insurance to help protect your financial health.
For some, health-care costs represent a larger share of their budget as the years pass.
Recognizing this, you may want to consider Medigap insurance to cover the expenses that Medicare does not, which can add up quickly. You also might want to consider some form of extended-care insurance, which can be structured to pay for nursing and home-care services—two services that Medicare doesn’t cover.
The involvement you have with managing your investments may change as you age. For many seniors, that sort of day-to-day responsibility is unattractive and even untenable.
If that’s the case, you may wish to consider what role annuities can play. Annuities can be structured to pay you income for as long as you live, relieving you of the concern of outliving your retirement money.² Certain annuities even offer extended-care benefits, which allow you to address two concerns with one decision.
If you’re like many seniors, you have a strong desire to leave something to your children, grandchildren and perhaps a favorite charity. Through the use of life insurance, you can pursue these objectives. For example, life insurance can be used to create an estate or to equalize an estate transfer among your heirs.³
Insurance will never be able to prevent the health issues that come inexorably with age, but it can be used to mitigate the potential financial consequences of them.
Each month you settle down to pay bills. You pay your mortgage lender. You pay the electric company. You pay the trash collector. But do you pay yourself? One of the most basic tenets of sound investing involves the simple habit of “paying yourself first,” in other words, making the first payment of each month into your savings account.
Americans’ saving patterns vary widely. And too often, short-term economic trends can interrupt long-term savings programs. For example, the U.S. Personal Savings Rate jumped from 3.5% to nearly 8% in May 2008 during the housing and banking crisis. It then rose and fell sporadically as the economic environment appeared to stabilize.1
Anyone who’s ever managed their own finances knows that saving can be a challenge. There seems to be an endless stream of expenses that demand a piece of each month’s paycheck. Herein lies the genius of paying yourself first: you get the cream at the top of the bucket, and not the leftovers at the bottom.
The trick is to prioritize. Make it a point to put your future first. At first, saving may mean a small lifestyle change. But most individuals want to see their net worth increase steadily. For them, finding ways to save becomes more of a long-term commitment than a short-term challenge.
What will you do with the money you save?
If retirement is your priority, consider taking advantage of tax-advantaged investments. Employer-sponsored retirement plans, such as 401(k)s and 403(b)s, can be a great way to save because the money comes out of your paycheck before you even see it. Also, as an added incentive, some employers offer to match a percentage of your contributions.2
For money you may want to access before retirement, consider placing the funds in a separate account. When the balance hits your target, you may want to move the money into investments that offer the potential for higher returns. Of course, this may mean exposing your money to more volatility, so you’ll want to choose vehicles that fit your risk tolerance, time horizon, and long-term goals.
In the pursuit of growing wealth, sound habits can be your most valuable asset. Develop the habit of “paying yourself first” today. The sooner you begin, the more potential your savings may have to grow.
The U.S. Personal Savings Rate historically has fluctuated as Americans are influenced by the short-term economic environment.
Sources: Bureau of Economic Analysis, 2015, for the period July 1, 2005 through June 1, 2015. National Bureau of Economic Research, 2015
What’s the value of a financial advisor?
Two studies found that working with a financial professional can result in higher returns and potentially lower personal stress.
Seventy-six percent of people within 15 years of retirement are stressed when thinking about retirement savings and investments.¹
Working with a financial advisor to develop a written retirement income strategy, however, can increase your confidence and happiness, according to Franklin Templeton’s annual Retirement Income Strategies and Expectations Survey.
In addition to providing financial guidance, financial advisors may also add about three percentage points in net portfolio returns over time, according to a study by Vanguard.³
It’s important to remember that financial advisors also may offer guidance that wasn’t measured in the two studies. Advisors can help develop strategies that protect against the financial consequences of loss of income, and coordinate with other financial professionals on tax and estate management.
Our team of advisors are well-equipped to serve and educate young professionals, individuals and families on all aspects of their financial world. Some products we provide include:
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