IT PAYS TO BE FINANCIALLY PREPARED
Are you worried you and your spouse aren’t saving enough for retirement? It’s a growing concern among many Americans, and rightly so. With new medical advances, retirees are living longer than ever before – meaning their retirement savings need to stretch further.
According to the 2017 Lincoln Retirement Power® Participant Study by Lincoln Financial Group, most Americans will need to save a minimum of 10 percent of their income each year – more if they plan to work for fewer than forty years. However, only 4 in 10 workers are currently meeting that savings goal.
Luckily, it’s possible to build a secure financial future, even if you feel behind. Follow the eight steps below to master your savings plan and set yourself up for retirement success.
Step 1: Schedule a “Money Date”
Let’s face it, life is busy. It’s easy to focus on the day-to-day of work and family life, meaning many couples often neglect important financial conversations about the bigger picture. Schedule a time when you plan to talk exclusively (a “money date”) – and candidly – about your individual and collective finances. Ask one another questions about financial hopes and dreams, money worries and ideal retirement scenarios. Think through your short-term and long-term goals and begin formulating plans to meet them.
Step 2: Commit to Ongoing Conversations
A successful money date is a great start, but it will often leave you with much more to talk about. Commit to continued discussions with your spouse where you’ll each be open and honest about all the money matters that came up during your money date. Check-in with one another as often as needed to keep yourselves on track to accomplish your shared goals.
Step 3: Tackle Saving as a Team
Periodic conversations about your finances will usually lead to action steps for one or both of you, and saving is likely to be chief among them. When it comes to retirement, financial preparation is a team sport. If you’re both working, you should talk about your shared savings goals – as well as whether you’re collectively meeting them. The first thing to do is to know how much you’re putting into your accounts and whether it amounts to the maximum allowable. It’s also important to understand your vesting schedules and whether either of you will be eligible for pension benefits. Finally, understand how much each of you will be able to collect from Social Security when the time comes.
Step 4: Get Life Insurance
It’s a difficult topic, but you’ll need to address the financial implications of you or your spouse passing away. Retirement planning is easily thrown off when an unexpected expense requires one spouse to use money that was earmarked for retirement. Having life insurance can protect against this outcome, so it’s important that you each have a policy. If you do already, review whether you have enough coverage. Consider the amount of your mortgage and other debts, as well as future goals like paying for college for your children.
Step 5: Learn the Specifics of Each Retirement Account
Whether you have a 401(k) or 403(b) through your employer or you’re contributing to a traditional IRA or Roth IRA, it’s important to understand the nature of each one. Know how much you’re contributing, whether you receive any employer matches and whether you’re taking advantage of all opportunities to maximize your savings.
Step 6: Keep Up with Investment Rules
Although you may have learned the specifics of your retirement accounts, your work is never really done. The rules and regulations regarding tax-advantaged accounts and investing seem to be ever-changing, and it’s important to keep up. Since this can be difficult – and sometimes rather technical – you may consider enlisting the help of a financial advisor.
Step 7: Consider Long-Term Care Insurance
According to the research, 52 percent of Americans turning 65 this year will require long-term care at some future juncture. With the costs of care rising each year, the health needs of you or your spouse could deplete your assets quickly in your later years. Long-term care insurance may not be for everyone, and policies can be quite expensive, but it’s worth consideration. If you end up needing it in the future, it can lighten both financial and emotional burdens for your family. A newer type of policy that is popular is a hybrid that combines long-term care with life insurance, so this may be worth investigating.
Step 8: Build, Build, Build
As you move forward with your retirement savings plans, your goal should be to increase your net worth each year. So, keep track of what your retirement dollars are earning, and make sure you’re building toward that dollar figure you need for a comfortable retirement. At the same time, build up a “security basket” of assets that protect you and your spouse: cash reserves, wills, health insurance, and disability insurance. Finally, build out your dream retirement plans. Envision where you will live, what your days will look like and whether you will travel. When you’re working so hard to achieve your goals, it’s important to allow yourself time to remember why you’re doing it.
If you don’t think you’re saving enough for retirement, it’s not too late. Take these eight steps to master your finances and create the dream retirement scenario you and your spouse are dreaming of.