Game of Life: Financial Planning at Every Age
by Brandon Miller on May 31, 2018
If you’ve ever played the Game of Life board game, it becomes clear that compressed into the colorful path there are various stages of life. Each stage holds its own major financial challenges as well as prospective profits in addition to surprises (new baby!) and forks in the road. In the real world game of life, much is the same, but with sound financial planning throughout the different stages of life, you can have much more control over how much you retire with (as opposed to those random tiles you collect throughout the board game). And, along the way there should be a trusted financial advisor to help give advice and direction on important investment and other monetary decisions. Here are a few of the primary segments of an adult’s life and the financial decisions associated with that general age.
First Real Big Kid Job
The first “real” job after college or other educational training is a big deal. That starting salary seems enormous, but is quickly levied by the realization of the mountain of student loan debt, apartment rent, credit card debt for all the things your student loans wouldn’t cover, car payments to get to the job, and other costs not to mention attempting build good credit.
Financial planners play an important role at this step as they can help set-up a responsible credit card and loan payment plan in accordance with your budget. This is also the optimal time to begin investing in retirement. Yes, it sounds crazy when cash flow is limited, but it’s also the best to start early by participating in a 401(k) plan. A financial planner can help best determine if a nonliquid tax-deferred IRA is appropriate or, rather, a Roth IRA.
For Richer and Poorer
Marriage is a big deal emotionally, but it’s also a contract that more or less ties two individuals’ financial assets together. Newlyweds may have managed their money differently from one another in the past, but marriage requires joint financial decisions. It’s important when getter married to work through a collective budget, set financial goals, and set some general guidelines on how payments will be made.
Bundles of Joy
Kids don’t always follow the job or marriage, but often they do. And when they do, they don’t come cheap. Using the value of the U.S. dollar in 2015 the USDA estimated the average married couple can expect to spend $234,000 for a single child from birth to age 17. That breaks down to approximately $12,400 to $14,000 a year and doesn’t include the cost of secondary education or pregnancy and giving birth.
Just as early career is the best time to start saving for retirement, when the child is born is the best time to start saving for college. Look into 529 education plans that offer the chance to grow funds over time; so long as those funds are utilized for education expenses they’re tax free.
Prepare for the Golden Ages
Retirement sounds like a golden opportunity for many. A chance to reap the fruits of your labors and enjoy the finer side of life. But, this is an unlikely scenario if retirement isn’t properly prepared for. In your 40s and 50s you should honestly assess your readiness for retirement and define the major goals ahead. You’ll want to mitigate as much risk as possible; at this stage in the “game” there’s not a lot of room for big asset missteps. It’s important to have a clear strategy about how to reach your financial goals and a knowledgeable financial planner to help you get there.
By age 63 half of the U.S. working population is retired; nationally 62 is the general youngest average retirement age and 65 is the oldest average. A low six percent of Americans work up into their 80s. While the average retirement age is shifting to later in life, even slightly, the average life expectancy of the average man who reaches 65 is expected to live until age 84.3; for women it’s 86.6. With close to 20 years in retirement there tends to be different chapters of retirement. The first part of retirement may be very active filled with travel, volunteering, and even working part-time. Early retirement is an important time to ensure your estate plan is up-to-date as well as understand how to convert pensions and retirement savings into income. The latter retirement years usually mean a set of different goals, like making savings last and considering options to deal with disabilities or assisted living.
Throughout the different stages of life your financial goals will shift as major life events occur. When changes occur, review your financial plan with a financial planner to ensure your assets and investment vehicles are still working for your plan.
Brio Consultants, LLC dba Brio Financial Group is a Registered Investment Adviser. This is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Brio Financial Group and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Brio Financial Group unless a client service agreement is in place.