Three Financial Planning Tips When You Turn 50

Hey, welcome to this segment on three financial planning things you should do when you turn 50. As I was thinking about this, I was thinking of the medical world. And in the medical world, they give everybody basically a task to go get a medical scan, check-up you know around age 50. Sometimes they’re saying it might be age 45 to go get this done. You know, sometimes they say 50. But you need to get a check-up. You need to go get this stuff figured out. And so it’s not maybe ideal or something that you look forward to. And I see the same kind of overlap with people in their finances. They get a fear of what they don’t know. They get a fear of being vulnerable, you know with Financial Advisors and such. And so they just avoid it. But if you’re turning 50 and you haven’t done some of these that I’m about to explain, then it’s time. And we’re here and we love to help. We love to teach and we don’t sell. We just say look, here are your options. Here’s your situation and here’s what we might think a good solution could be for you. So the first thing that you’re going to want to do is take a deep dive into the details of your plan. Your plan should consist of five pieces. You should have an income and spending plan. You should have a savings and risk plan. You should have a tax optimization plan. You should have a health care plan and an estate/legacy plan. So step one, do a deep dive and cover all of those bases. Maybe even get a written plan on all five of those pillars. Figure out where you’re out with those. Step two, we want to identify, separate and then calculate our wants versus our needs when it comes to how much money is it going to take. Okay, so when it comes to your needs, those are easy hitters. Usually easy to calculate: food, fuel, housing, clothing, electricity, heat, propane, property taxes. So you can usually knock those out pretty quickly. And then you get into more of your lifestyle calculation, okay? When I go out to eat, where do I want to go out to eat? If I go on vacation, how do I want to travel? How do I want to vacation? And start calculating some of your bucket list items and figure out what you really want, okay? And when you separate the needs from the wants, now you have a good idea of what your base income has to be just to cover your needs. And then what you might have to do at age 50, starting to get those wants done in an efficient and safe way. And then step three, it would be really cool if you could identify your future withdrawal rate. This is a big fear that people have when they enter or are getting close to retirement. Am I going to run out of money? Well, I don’t know. I mean that’s why we had to get all this detailed dive into your plan. Because then we can better ascertain what kind of withdrawal rate you might need. And so to figure out your withdrawal rate, you can kind of double back and you can say let’s start with my contractual lifetime income. So this would typically be: Social Security, Pensions maybe, maybe you have income annuity with a guaranteed lifetime withdrawal benefit or income rider. Okay, so these are contractual incomes. And you can calculate those. And then you go back and you calculate your spending. So when you’re spending, you want to make sure that you, you know figure out how much are going to go to taxes. How much are you going to give? How much are you going to save of that cash flow? What are your needs and what are your wants? And at the end of it, that’s going to basically going to tell you how much you have to pull from your portfolio. So when you calculate your annual gross distributions from your IRA, Roth, so forth. Divide that by your total portfolio, that gives you your withdrawal rate. And if you can identify your withdrawal rate, you can circle all the way back to step one to figure out if you need to make changes in your risk. If you need to make changes in your tax planning. If you need to make changes in how much you’re saving in your 401K. You know, at age 50, you get what’s called “catch up provisions” in both your 401K, Roth 401K and Roth IRAs. And they let you save more as you prepare. So if you’re sitting there and you’re like wow, I don’t know if I’ve done a deep dive into the details of my plan, that’s why we’re here. We have a team of Advisors that love to teach. They love to help people figure out where they’re good and where they need to have some attention on their planning. And that could be everything from estate planning to health care planning, income planning, risk/mitigation strategies. It’s a wonderful job and mission that we get to serve each and every day. And so please feel free to reach out to us anytime. I hope you have a great day and you found this helpful.