Ep 89: Your Financial Plan and Checklist for your 40's and 50's

We are continuing our conversation through the decades. And this week, we are focused on what you should be doing in your 40s and 50s. 

There are things that you might be experiencing in your 40s and 50s that have caused you to hit a pause. If that's the case, then listen to our last episode. Because you don't have to be in your 20's and 30's to start your wealth journey. 

But, otherwise, in your 40's and 50's, you are probably well established in life, and I love this pre-retirement conversation. 

Today's episode will cover your biggest expense in your 40's, starting your career over if you stayed home to watch the kids, and why fear can be retirement's biggest enemy. 

This month's Thrive For[e]ward non-profit of the month is Diverse Daisies! Established in 2012 and located in Minnesota, Diverse Daisies is a 501(c)(3) nonprofit organization designed to equip young women ages 11-15 with the skills and confidence that will encourage them to succeed. Learn more about their mission, and help them succeed with your support, here: https://diversedaisies.org/

Find out more about Forethought Planning: www.forethoughtplanning.com

Follow Forethought Planning on social media:

Facebook

LinkedIn

YouTube channel

Score our free Wealth Assessment tool on our website.

Securities offered through LPL Financial, a member of FINRA/SIPC. Advisory services offered through Advisors' Pride, a SEC registered investment advisor. LPL Financial, Advisors' Pride, Forethought Planning and the guests of Thrive For[e]ward podcast are separate and unaffiliated parties. The views expressed here are those of the participants, and not those of Forethought Planning, Advisor's Pride, or LPL financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. LPL Financial and Forethought Planning do not offer legal services.   

Transcript

Shannon Foreman  0:01  
All right, friends, welcome to the Thrive Forward podcast. We are continuing our conversation through the decades. And this week, we are focused on the conversation of what you should be doing in your 40s and 50s. Again, as I talked about in our last conversation around our 30s, in our 20s, this is very personal information. So as it comes to the suggestions that we are making is important that you lean into those around you, as I commonly refer to your personal board of directors, meaning close to them, what is it that you need from them, are the things that we're talking about relevant to your financial situation, I've talked about this, and then teaser to this month's podcasts. But honestly, there are things that you might be experiencing in your 40s and 50s that are starting you over and things that maybe you experienced in your 20s and 30s, perhaps you're going through a major life transition that has caused you to hit a pause, then go back and listen to that one, just because it says it's your 20s. And 30s doesn't mean that it isn't just you have to be in your 20s and 30s. That's essentially just starting your wealth journey. And so don't limit yourself to just those spaces. Now, that being said, you are well established in life, my friends, you are in your 40s and your 50s. And as many of my friends in their 40s, say 40 is the new 30. I don't know yet, I haven't hit that decade. But I have served many clients in this space. In fact, it's kind of my sweet spot. And I love this pre retirement conversation, you have so many different things that are happening in your 40s in your 50s as we kind of always do in life. But let's dive in to the great content. And if you know a 40 or 50, something who could use some of this advice, then my friend, share it, share it in your email, send it as a text, share it on social media, send a carrier pigeon, I don't know. But let's all continue to talk about money and spread the word so that we can all have a healthy relationship with our well. Alright friends, let's dive into the good stuff.

Shannon Foreman  2:26  
Alright, friends, we're gonna start out with your 40s. And honestly, I could probably do two single episodes on your 40s and your 50s. And maybe we will in the future dig more into these topics. But of course, your feedback is something that we are looking for. So if you like this content, then let us know. And we will definitely break it down even more. That being said, let's start in your 40s. So of course we talked about in your 30s just the amount of life transitions well in your 40s, you're likely going to go through some very similar things, maybe there are some changes in relationships that you have, maybe your kids are going to leave the nest, perhaps they are going off to college. Now I hope that you have not just started the conversation on saving for college. Now if you have, and this is brand new to you, then my friends, listen to our college savings plan podcast. It's something that will break down a lot of really great information and on our blog on our website has a lot of really great resources that I can't cover in this one topic. But ultimately, please start having the conversation with your children around the financial responsibility that they will have how much skin in the game, are you going to require that they have? Is it something that you want to be able to cover all on your own? That being said, college is expensive? And so are you going to cover the full cost of an in state tuition school or Harvard. There's a big difference between the two. We're in Minnesota, the University of Minnesota is a phenomenal school. In fact, Go Gophers guy Yuma. Um, I am here to go first fan. That being said, you want to make sure that you are having realistic conversations about the expectations. Don't wait until your children's senior year of high school to have this conversation, take them on tours of their college have realistic conversations about what you've saved. Don't apologize if you haven't saved anything times are tough, and it isn't something that makes you a less than parent just because you haven't saved enough for their college. Just be realistic and establish. Okay, so this might mean that we're going to have to take out loans. Here's how we're going to approach that conversation. Here's what I need you to look at in terms of scholarships. All of those things are very important conversations and great avenues to start teaching your children to have a great responsibility with wealth. Also, when you're in your late 40s and entering into your 50s Do you want the snapback job I love the pullback child, the one that lives in the basement, or do you want to teach them healthy behaviors on how to live on their own. Of course, as parents, we're always going to welcome back our children. But at the end of the day, this is your prime time, you shouldn't have to welcome them back, if you don't want to start having those great conversations with them on how they can have a healthy relationship. And the perfect way to start that is around the conversation for college, then maybe after college, you've got a kid that is looking at getting married, don't be the sole person that provides all of the wedding either. Let's establish some of those conversations as well. When your individual that you are raising establishes a great partnership with someone that they love, have those conversations as well. Now, let's twist and turn back to you. You're probably advancing in your career, or maybe you have seen at home. And now Now re entering the workforce. Either way, it is a great time to negotiate for yourself, what a raise looks like or negotiate as you're entering back into the workspace, your value of what you provided as a parent for so many years. Don't underestimate that element of reentry to the workforce. In fact, a great resource for you bus stop mamas.com I've actually hired a few of my employees through bus stop mamas I personally know, Mary Kay, their CEO, and they're a fantastic organization that helps women re enter the workforce after they've been at home raising their kids. And let me just tell you, that is a feat in itself. So don't underestimate yourself. If you are well established in your career, and maybe you were the working mom, I don't understand why we have to signify as women working versus not working mom, I feel like we're all always working. It's just are we working inside the home or outside the home. And perhaps you were having this badass career. And now you're a director level and above. Again, this

Shannon Foreman  7:00  
is like the sweet spot that I love. But understanding your compensation package, you know that you've got your retirement in your 401k. But as your compensation grows, likely now have been introduced to you stock options, restricted stock deferred compensation, and maybe this isn't your jam, and you're just like, What am I supposed to be doing with all of this, please enter don't get into your personal board of directors, this is key. So many different moving parts happen when our compensation packages be an end up being more complex, there are taxes that are involved. There are right times to sell and wrong times to sell and different things that we need to understand. Playing into that is also understanding what our exposure is to our company's stock. Of course, we all believe in the companies that we work for. I of course do because it's my company. But before I worked for myself, I did believe very much in the companies that I worked for. And of course, we want to support them. But I need your to remember a small firm several decades ago, called Enron, I don't want you to be in that situation. In fact, there are many other Enron scenarios that maybe we just don't talk about. But the reality is many, many, many individuals, especially well established in their career, if they've worked for the same company for a long time, not only have employer stock in their retirement accounts, because they're receiving a match from their employers, but they're also receiving employer stock and bonuses that they are getting. And perhaps if you're not combing the investments that you have outside of your 401 Ks, you could even have some of their stock within those portfolios. So it is very important that you understand a phrase called asset allocation, how diversified Are you in your portfolio, not only in the vehicles that you're invested in, but also making sure that you're not overweighted in one type of security versus another. So important, if this is not your jam, to simply lean into your financial planner, your tax planner, to be able to work together on your behalf and understand those scenarios better for you and explain them to you. You don't just want somebody to do it for you. I get it. Passing it off sometimes is the easiest thing. I have some clients that are like, please just take it Shannon, and I'd love to tell you that I will take it but I'm also going to turn it back to you and say alright, now here are the complexities. Let's make them a little bit simpler to understand, so that you understand how they impact you in the long term. That being said, in your 40s you're probably progressing on different life experiences and wanting to travel more and get yourself out there. Please don't get caught up. As I've said many times in our podcasts but especially throughout the decades that we are visiting, don't get caught up in everything that's happening around us. Don't get caught up of whether you have enough in savings or not. I think a lot of times this ends up happening with our houses and with our material possessions that we have. Now, that being said, Please stick away from getting yourself into more debt than what you are capable of doing. In fact, you're getting closer and closer to retirement. And I say this often, but chances are most individuals don't have a pension going into retirement. Unless you are a state or federal employee or union employee, you likely don't have a pension. And so the only person that's truly saving for yourself for retirement is you. So you need to make sure rather than leveraging yourself, that you are making sure you're building that foundation. And the best way to be able to do that is do it a little bit over time, we refer to that commonly as dollar cost averaging, you're essentially doing that every single time you participate in contributing to your retirement account. But as I talked about in your 30s, you can also establish a third bucket, not just your retirement savings, or your tax free retirement savings, but also just a taxable investment account. This is much what you know, maybe you have restricted stock options just because you liquidate those to diversify yourself doesn't mean you can't turn around and reinvest those in other types of securities and investment vehicles. Again, you have to understand what your risk appetite is and what you're comfortable with. And oftentimes I say that that's the it's more personal than our DNA. And even between spouses and partners, there are different risk tolerances. So don't just lean on one person in your partnership to be the lead relationship, when it comes to finances, make sure that you are very aware in what's happening. It's also important for you to reevaluate constantly, your estate plan and your insurance plan. So make sure that you're checking in on those things, do you have the right amount of coverage, perhaps maybe now that the kids are out, maybe you're downsizing the house, you don't need those anymore, as much as you did before, or perhaps you're evaluating in the aspect of you want to pass on generational wealth. And so you are going to keep those policies around or extend those policies.

Shannon Foreman  12:21  
A couple of other things that I want you to think about while you're getting closer to that retirement space is how you're saving for health care, health care, and retirement can be one of the largest costs. And sometimes we don't necessarily always talk about the logistics of that Medicare is not free, you still have to have Supplement Plans. And a great way to start saving for some of those things is contributing to an HSA. If you have a high deductible plan, it allows you to save for essentially a tax free savings that you can use towards health care in retirement. Now, there are some rules on using those to make premium payments, but other large health care expenses like prescriptions, I appointments, dental, all things that are semi covered under Medicare, but not completely, you want to make sure that you're revisiting those things as well. So maxing out your HSA, especially to considering that as a tax deduction. Depending on where your income levels are at, of course, as I always say, very personal. So to wrap a bow around your 40s. And again, I could probably have a whole episode on this. Make sure that you're having conversations about college savings, weddings, big types of expenses with your children, or those individuals that you are responsible for paying for set expectations. Help them have a healthy relationship with money, not just you. And don't apologize if you haven't been able to save to that element. Just create an outline and a plan together of what that might look like to have a healthy relationship. Maybe it's loans. Maybe it's, you know, there are tons of scholarships out there. Go visit that blog that I talked about, then, are you making sure that you're revisiting your cash flow and understanding that those raises that you have or you so deserve that income greater making sure you're doing the Hallmark and your understanding when appropriate to ask for a raise and those complex compensation aspects of things, weaving in your personal board of directors and having the diversification conversation, making sure that you're revisiting your asset allocation, your risk tolerance that you understand how your investments are working, and you're not just delegating that task to somebody else, making sure you're not getting caught up with those other individuals around you. And being really, really, really smart with what you're investing in. Whether it be in your home, whether it be in your securities, your investments, your traditional ways of investing through your 401k your Roth IRA is in your investment accounts. Make sure that you're truly looking at what it is that you need money not what everybody else is doing because investing is very personal. Alright, let's jump into the next decade, your 50s. Alright friends, let's take a pause in our conversation around what you should be considering in your 40s and 50s. This can all be a very overwhelming conversation when it comes to talking about our wealth, and where we are and what we are doing. Perhaps you have so many moving parts out there, and you're running your crazy career and transitioning your family in multiple different ways. It's that time for you to start thinking about you. This is your permission slip to consider beginning that financial journey in a healthy way, if you felt like it's unhealthy. So let's begin with a partnership with forethought planning, schedule your wealth assessment today, and we will help create for you a roadmap to where it is that you want to be, we will be your partners and your co pilots along the traveling to where it is that you want to be. We will help you redirect when life brings us crazy turns. We will help you strategize, we will help you plan in all the different aspects of what it is that you need to be able to have a stellar journey with your wealth, simply go to forethought planning.com backslash wealth assessment to schedule your appointment today. Now, back to our great episode.

Shannon Foreman  16:31  
All right, friends, you are now in your 50s. And that retirement date of 60 to 6567. Or maybe 70 looks so much closer than it did when you were in your 20s. Right. So this is the time for you to really check boxes and understand, I hope that you have listened to the other pieces, whether it be your 40s 30s 20s so that you can have those healthy conversations with the individuals in your life and understand where you realistically are at like I said at the beginning of this podcast, it doesn't mean that just because you're in your 50s doesn't mean you don't need to revisit some of those things. Don't overthink that element. But let's talk about some of the things that I work with clients on specifically in this space or status. So you are well established, you are senior in your career, you are earning your top wages, you are likely, if you have not already had shifted children out of the house, you're likely still at the beginning stages of that in your early 50s. Maybe, and I'm looking at that transition. Now the other pieces that you should consider understanding are an other elements of how to look at retirement, making sure again, you have different buckets of access. So oftentimes, I call this your three buckets of retirement planning. My clients want choices of how they access their income once they get to retirement. So maybe you're making sure you have those diverse choices, tax free, taxable, and tax deferred. Oftentimes, this is the biggest bucket for us, we want to make sure that we're evening out those other pieces, which is why I've so recommended saving for those tax free pieces when you're early on in your career, because then that has the element of compounding to your later pieces in your career. But maybe that wasn't available to you. Now my friends, at age 50, depending on where you're at, you are well established for a catch up for your retirement. So it's a great opportunity, your income levels allow for you to participate in those places. Of course, your cash flow also has to allow. So maybe you need to take a second look at where you are for what goes what's coming in and what's going out. Are there elements for you to make sure that you are padding extra. So often I hear I just got to get to 65 I just got to get to retirement. Well, my friends, especially my female friends, we live longer. And so it's not just 65 that you need to get to. It's much beyond that. And so we need to think about how do we make that last for us? How are we going to strategically be able to start to be able to pull income from our portfolios, which we will talk about in our 60s and 70s. But we need to make sure we're saving in various different buckets to allow for us the freedom to choose not just to be locked in to one specific place. That being said, also understanding that we are getting closer and so maybe our risk tolerances adjusting, maybe we get a little bit more nervous with market fluctuation, because we're getting closer to the day we might need to start using it right. Don't play into those emotions. Please don't be the individuals that click closer to retirement and pull everything out in fear when the market fluctuates or goes down. That is actually the Worst thing that you can do for yourself. Investing is for the long term. So like I mentioned, it isn't just 65 that you've got to get to, it's beyond that. So yes, you need to save to get to that place of income replacement at 65. If that's your target date, of course, that varies for many individuals. But you need to think beyond that your funds have to last longer than that. And so pacing with inflation is something that you need to have a good understanding for. And the behavioral parts of things sometimes require us to lean in really hard to our personal board of directors. In fact, that is something that I find very important in the job that I have with my clients is helping them to be able to see through the financial plan through market volatility, that they'll still be able to achieve their goals. So make sure that you're leaning into those pieces of things before you're making dramatic decisions. So a couple other things to consider, please don't get yourself into more debt. A lot of times we're thinking about where's that retirement home that we want to have pay down as much of that debt, as you can see, that can be at a really healthy space. So often, I want my clients to be mortgage free in retirement, so that you can have more freedom about where it is that you want to be. Now, that isn't always the case. And there are plenty of people that I know that do still have mortgages in retirement, and maybe they're not as big as they were, when you started, fingers crossed. Hopefully you're not cashing out on your house and refinancing to pay for school for your kid or a wedding. That's not the responsible way to be able to pay for it. Let them have skin in the game, don't use your retirement to be able to pay for those things or accumulate debt that prolongs the inevitable of retiring when you want to be able to the other big piece, which is not something that everybody wants to be able to talk about. But we are going to age, and we don't want to wait until we aren't healthy to start thinking about that. That being said, long term care, is a conversation to be able to have with your partner and with your children, actually, because likely they are the individuals that are going to have to care for you. How do you want them to care for you? Do you want them to have to stop working to be able to care for you? Or do you want to be able to mitigate any of that using resources that you already have looking into? How to Self insure and save enough for yourselves to be able to use it? How are you going to compete with taxes? How are you going to compete with inflation, all of those things if

Shannon Foreman  22:42  
you're considering self insuring, and then also looking into long term care insurance, it is going to get more expensive, the older that you get. So in your 40s and 50s. Once your kids are done with college, it's a really good time to start thinking about what is it that you are going to be saving for long term care if you were to need it, there are a lot of great resources out there in conversation. In fact, there are some great insurance policies out there that aren't just use it or lose it. It's not like auto insurance, you can use it as a generational wealth tool as well, if you weren't going to need it for care. So just starting to have those conversations and involving your financial plan to be able to see what would be the impacts if something like that were to occur. So making sure that you're understanding in your 50s Let's put a bow around it. Like I've always said at the end of these, I could talk for days about the different things that you should be doing in the different decades that you're living, but I'm trying to make this short and sweet for you and digestible. That being said in your 50s, making sure that you are having again, a healthy relationship, not overspending that buying into the equity in your home, making sure that you are evaluating the different buckets that you are saving into to make sure that once you need to start saving for or start taking from them that you have the ability to choose where it is that you want to be evaluating your risk tolerance, not making emotional decisions when it comes to your investments, rather staying the course and understanding 65 isn't necessarily the target so the target to get to you, but you need your funds to last longer. You don't want to outlive your money, you want your money to outlive you, even if it means rubbing the last two nickels together. So make those decisions strategically, not emotionally. And if you need to rope in your personal board of directors then please do. Lastly, thinking about long term care insurance and understanding what the effects of a care event might mean for you and how do you personally want to be able to plan for that. This is something that you can plan for ahead of time a little bit more strategically from a financial standpoint, as somebody who has personally walked through this recently with loved ones, please don't wait until the last minute, please don't think you're invincible from these different things happening to you. It is likely that at some point in life, whether you're in your 90s, or in your 70s, that you might mean care. And so being able to have the conversation with the people that are important to you, and understand the financial impacts are a step ahead. And it's mature for you to be able to do that. Through all of this, I always want you to remember my dear friends, you are worthy of well.

Shannon Foreman  25:44  
Every month at forethought planning, we are highlighting local nonprofits who are doing great work in our community and helps to educate you on opportunities to volunteer or even give to these organizations. We are proud to say that diverse daisies is our nonprofit in the month of April, we will be contributing to them in a financial way, as well as encouraging the women that participate in our wealth circles to do the same. So if you find that their mission that we're going to talk about very quickly leans to you then please visit their website diverse daisies.org. Now a little bit about diversity. Diversity. Zs was established in 2012 and is an organization that empowers motivates and inspires young women of diverse backgrounds by giving them a place to belong, and a place to grow. Their vision is to instill confidence through a safe and positive environment. Each young woman is equipped in their future with skills and confidence to take them through the rest of their lives. They have seven core values around empowerment, friendship, diversity, equity, inclusion, teamwork, communication, community, and commitment. These young women are our future. And not only are they learning wonderful ways to navigate in the space of life while increasing their self esteem. They are also in different types of life skills, experiencing new adventures and exploring their personal values. If you'd like to find out more about how you can become involved with diverse daisies, please visit their website at diversity Z's dot org. The views expressed here are those of the participants and not those of forethought planning advisors, pide, or LPL. Financial all investing involves risk including loss of principle, no strategy assures success or protects against loss securities are offered through LPL Financial and member of FINRA and SIPC advisory services offered through advisors pride and SEC registered investment advisor LPL Financial Advisors pride forethought planning and the guests of the Thrive Forward podcast are separate and unaffiliated parties

Transcribed by https://otter.ai