Ahh! Finally some breathing room. The kids have gone to college or maybe even moved out. You may find that you still help them out financially from time to time, but for the most part, your job is done.
Your parents are getting older and maybe they are starting to have some health problems. You worry about how you will be able to help.
While we start getting excited about the possibilities of retirement, life has taught us that it is precious and nothing is guaranteed.
Here are 5 things to consider:
Increase Your Emergency Fund
You are in your higher earning years now. Higher level jobs take longer to replace. People who lose upper management jobs can spend a year looking for a position with a similar salary.
Health concerns begin to increase. Heart disease, cancer, or an extensive medical treatment can drain your savings as well.
Increase your emergency fund to a year’s worth of living expenses. Keep part of it in a savings account and part of it in a higher interest-bearing account.
Meet with a Financial Advisor
If you haven’t met with a financial advisor yet, now is the time. You need to ensure you are on the right track and discuss social security strategies. Maybe you’ve done such a stellar job of saving, you can retire early. On the off chance you haven’t saved enough, there may still be time to adjust your strategy and hit your goal.
The saddest thing in the world is retiring and learning you haven’t saved enough because you didn’t consider inflation in your calculation or you didn’t expect health care costs to be so high. We simulate unexpected scenarios to see if your nest egg will survive major setbacks.
Sometimes the difference between having enough money and falling short is simply the way you invested your 401K.
Max Your Retirement Savings
Your earning potential is at its highest. Now is the time to max out your retirement options through the catch-up contributions in your 401K and IRA.
Start thinking about consolidating accounts to ensure proper asset allocation and reduce volatility as much as possible. Review your investments quarterly. Now is not the time to become too risky, but you don’t want to be too conservative.
Review Life Insurance
This is a great time to review your life insurance. Insurance rates follow interest rates. Today’s policies may be able to offer more bang for the buck than what was available when you took out the policy 20 years ago.
Your needs have probably changed as well. The children are grown. You no longer have to worry about needing money to raise them if something happens to you. You may not owe much on the house. Your retirement accounts may be healthy enough to provide for your spouse. You may want to reduce your coverage.
Or perhaps you want to look at life insurance as way to provide a tax-free legacy to your family if something happens to you.
Review your living will, powers of attorney, guardianship papers and a trust if necessary since this is a time when families change through divorces, marriages and the birth of grandchildren.
Consider Long-term Care Needs
You watched your parents age and worry about the day when they need daily assistance. Maybe you already had to help a parent and now you worry about the same thing happening to you. You don’t want to burden your kids.
Long-term care is a fact of life. The U.S. Department of Health and Human Services estimates that 70% of people over age 65 will require some period of ongoing care at sometime in their lives.
If your parent is healthy enough to obtain coverage, you may consider buying the insurance for them. It will preserve their savings, as well as yours.
There are different ways to provide protection, but one fact is consistent. It’s cheaper the younger and healthier you are.