When you want to put your finances in order, it literally pays to have a plan. That’s because you gain the greatest returns over the long term. But wherever you are on the road to financial security, there are things you can do to keep moving forward.
Financial success: a journey
It is never too early (or too late) to take steps toward financial security, but the sooner you start the more chance you’ll have to accumulate wealth. With the power of compounding interest, it is a mathematical fact that your money will grow and multiply significantly over time.
For example, to accumulate $1 million by age 65, if you are 25 you need to save $285 a month. If you start saving at age 35, you’d need to put away $667 a month, at age 45 you’d need $1,686 a month, and at age 55 you’d need to save $5,430 per month (based on an 8 percent compounded rate of return).i
It is great if you are on track to be a millionaire. And even if you’re not quite there yet, there are ways you can pursue long-term financial success for yourself and your family at any age:
Age 0 – Buying permanent life insurance on your children while they are young offers a wide range of options and flexibility. It guarantees they will have life insurance as adults, meaning protection for their future family regardless of any changes in the insured person’s health. In addition, a permanent life policy also offers a safe and secure way of creating a financial asset that grows on a tax-deferred basis and could be used for education expenses, wedding expenses, down payment on a first home, capital to start a business or an emergency fund.
Age 10 – Teaching children good savings habits from early on will pay returns for a lifetime. Give them experience managing money and require them to save part of their allowance and work income. Strategies and tools for young people are available on www.themint.org.
The 20s – Set aside part of every paycheck for retirement and a rainy day. That includes creating an emergency fund and taking full advantage of employer retirement plan contributions. Protect your income with disability insurance and guarantee insurability by purchasing a permanent life insurance policy, even if it’s small.
The 30s – As family life and careers get into full swing, be sure your emergency fund can cover 3-6 months of living expenses and work with your financial representative to develop a plan to help you meet your long-term goals and needs. Be sure it includes disciplined savings and avoid taking on debt. Update the plan annually to reflect changes in your family, and do the same with wills, beneficiary designations and life insurance survivor income amounts.
The 40s – In this high-earning period, increase your contributions to various savings and retirement plans, including children’s college funds. Remember that it is possible to borrow money to fund a college education, but not retirement. Explore long term care insurance to qualify while you are healthy. Begin to visualize what you might like to see, be or do in retirement and evaluate how your financial plan aligns with those possibilities.
The 50s – Continue disciplined savings, pay down any debt and get your financial house in order for the future. As you approach retirement, look carefully at how you might spend your time, where you might live, and other considerations that will affect your income and expenses. Your financial representative can help you develop a plan for living in retirement that analyzes your goals, estimates expenses and identifies income streams to support them.
The 60s – Focus on what you want to do in your next life stage and how you can accomplish that. Consider the timing of your transition from full-time to part-time work or retirement and how that will affect your Social Security or pension income. Explore the most cost-effective ways to fund your essential needs such as health care, housing and transportation.
The 70s and up – Identify reliable income streams to cover fixed expenses, such as an annuity that provides lifetime income, as well as other sources of retirement income. Your financial representative can help you create a retirement distribution plan that will meet your needs and an estate plan that provides for your family and legacy. Be sure legal and health care documents are in order, including your will and powers of attorney, for others who might assist in your affairs if needed.
While starting early sets you on course for a financially secure life, there are things you can do throughout life to improve your financial situation. Contact your financial representative to help you evaluate the possibilities and opportunities best suited for you.