We recently worked with a couple in their late 40s and early 50s who wanted to “test drive” their retirement plan. They had been saving but weren’t sure if they were on track or it was too late to make changes.
Realistically, your late 40s and early 50s are ideal to play catch-up if you’re behind on saving. These are typically the highest-earning years for most individuals, and children may now be financially independent. However, retirement planning at this point should be taken with a grain of salt as it may still be a bit premature. How can it be too early to plan for retirement?
Financial plans in your 40s or early 50s are based on assumptions that will inevitably change. You don’t know how long you’ll live or the cost of your health care in retirement. What you can gain from planning, though, is perspective.
Many investors don’t consider what their actual retirement lifestyle will look like. Most focus on when they want to retire rather than how they will spend their time. In those first years, think about how you’ll use your time. Will you be traveling? Caring for grandchildren? Starting new hobbies? Most people pursue activities they didn’t have time for while working, and these activities often correlate with how much you’ll be spending in retirement.
Conventional wisdom suggests you need a “retirement number,” but we don’t believe your future, 20 years from now, can be reduced to a single figure. If you’re unsure what your retirement will look like, it’s difficult to accurately estimate your spending, making it even harder to identify that “number.”
That’s not to say meeting with a financial planner in your late 40s or early 50s is ineffective—it’s quite the opposite. It offers valuable perspective. An adviser can calculate the net present value of your current retirement savings, factor in how much you’ll save over the next 10 or 20 years, and project how your investments might grow. This method uses more reliable data than assumptions about future health care costs. With this information, your adviser can estimate how much you might be able to spend in retirement. Is that amount sufficient for your needs? Will it support the lifestyle you envision?
Ideally, after meeting with a financial planner, you should walk away with actionable recommendations. The Henssler Ten Year Rule considers your liquidity needs 10 years into the future. If you’re in your late 40s and don’t plan to retire until your late 60s, you probably won’t have immediate liquidity needs from your portfolio. However, the insights you gain can help optimize your savings and asset allocation. You might be saving for mid-term goals like a child’s education, a wedding, or an anniversary trip, and you can incorporate these goals into your overall financial plan. Working with an adviser can also help determine if you should increase your savings or diversify the tax status of your accounts.
It’s a worthwhile exercise to consult with a financial planner in your late 40s and early 50s to ensure you’re on track. Just remember that many of your assumptions about the future will likely change.
Ready to see if you’re on track for retirement? Whether you’re catching up on savings or fine-tuning your financial plan, it’s never too early—or too late—to gain valuable perspective on your future. Take the next step toward financial confidence by consulting with a professional. The experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the October 19, 2024 “Henssler Money Talks” episode.
This article is for demonstrative and academic purposes and is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
