Retirement and estate planning are different yet related activities that everyone should address. Our credit counseling advice is to stay on top of this. Both need attention and action throughout a person’s adult life. They change with you as life changes. Here are some retirement and estate planning tips to help manage your finances.
Retirement Planning Tips
The earlier you start planning for retirement, the better prepared you can be. More time means an easier savings road and more compound interest! Simply put, you need to try and forecast what your future needs and wants will be. To get started, answer these retirement questions to help you calculate your financial needs:
- Lifestyle- comfy and casual or globetrotting?
- Inheritance for the kids?
- Any expected costly medical needs?
- Have you started investing yet?
- When do you want to retire?
Additional Retirement Tips
- Start investing a certain percentage of your income every year. Increase the amount until you hit 15%.
- Don’t remove money from your retirement funds.
- Compound interest works especially hard the longer you invest. Don’t wait too long to invest or get too side tracked trying to pay for your kid’s college education.
- Contribute to your employer’s 401(k) plan at least enough to max out the employer contribution.
- Change your investment risk throughout the years- more risky and aggressive while young to very safe and stable near retirement.
- Check in with a professional for some financial counseling to ensure you are on track.
Estate Planning Tips
Estate planning solidifies the details of your wishes as well as helps maintain order and stability for your loved ones. It directs any assets from your diligent retirement planning efforts that remain once you pass. Always make sure to be organized, diligent and clear.
There are a few main documents in an estate plan:
- Power of Attorney
- Living Will/Health Care Proxy
- Trust (not everyone will need this)
Depending on your stage of life, one or all of these items might be reasonable or expected of you. As your situation changes- marriage, assets, children- so should your estate planning. Forbes.com shares insight into the requirements for these different stages.
Forbes Estate Planning Tips
18 & Single: Power of Attorney, Living Will. Parents don’t automatically have control over their children’s health care, even if they are on their insurance, live at home or remain as dependents on taxes. In case of a medical emergency, make sure someone you trust can take responsibility quickly and legally with a living will or health care proxy.
Single & Employed: Power of Attorney, Living Will, Asset Beneficiaries. Make sure your assets are squared away, like 401(k) plans or other investments. You should also have prepared a living will for medical emergencies.
Married/Committed Relationship: Power of Attorney, Living Will, Will. At this stage of life, you should get everything in writing. Protect your significant other with legal documents so assets won’t be divided by law but how you want them allocated. You may also start to consider life insurance.
Parents: Power of Attorney, Living Will, Will, Life Insurance, Appoint Guardians. Parents need to make a few more adjustments to their estate plan once children enter the scene. Life insurance is important so that the family can maintain their standard of living and provide financial support for future expenses like college or job training. In the case that both parents suddenly pass away, make sure a legal guardian is named in the will.
For elders, estate planning can also ensure independence, security and a way to avoid unnecessary conflict with children while living and able to care for themselves.
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