Ernie Neve -- Your Financial Doctor?

April 27, 2015

“If someone is going down the wrong road, he doesn’t need motivation to speed him up. What he needs is education to turn him around.” – Jim Rohn

I thought I would take the time this week to give you an objective, “incentive-free” look at what your finances should look like when you hit the half-century mark. If you are close to that mark, I thought it might be useful for me to lay out the “perfect” scenario.

And look — if you’re not perfect, at least let it be a benchmark…

Many people see a doctor when they hit the age of 50 -- well, let this be a dose from a financial doctor, if you will.

1) Your estate plan should be fully in place.

Of course, various assets are handled differently. This is the time to make a complete review of how your plan is put together, to ensure that EVERY asset (not just the tangible ones) are still handled properly.
Intangible assets can include such things as what you are passing down to your children in terms of "family ways" and values that you would like to see spreading down throughout your generations. This is an important step at mid-life.

2) If college is paid for, consider dropping term insurance.

At this stage of life, it becomes more costly to pay for this service. You are probably a the point where your children are nearing the completion of their education.

Remember that you purchased "piece of mind" (term insurance is not an investment) so that if anything were to happen to you, your home and your children's education could be paid for. If those things are now moot, it may be time to re-evaluate.

3) Evaluate where you are with your saving and investing.

You may not want to retire yet for quite some time. That's a wonderful place to be. But you should be considering whether you have saved up enough to match your desired lifestyle spending. It's a good rule of thumb that you should have saved about 8-10 times your annual lifestyle spending at this point.

If you haven't?

4) Catch up on your savings.

At age 50, maximum savings in a 401(k) or 403(b) account increases from $18,000 to $24,000 in 2015 (it is $500 less for each amount in 2014). At age 50 or older, Roth contributions also increase from $5,500 a year to $6,500 with these “catch-up” provisions. If we don’t have eight times our lifestyle spending saved, now is the time to press these limits.

Of course, saving well is half the battle; investing well is the other half.

That’s a subject for another day.

5) Lastly, begin considering what you really want out of retirement.

Consider that living a life of purpose doesn't perhaps mean decades of simple recreation.

Reaching the place where you don't "have" to work is a wonderful marker of true success. But you can make the decision to view your retirement years as an opportunity to do new, meaningful work. Commit yourself to a non-profit, or a ministry endeavor. Find ways to strategically invest your time and your energy into a different work that matters (aside from your first half career).

Although you can have that attitude at any age, it is especially powerful when redefining the second half of your life.

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