By Millie Chevez, Internal Relations Administrative Assistant
Long-term planning refers to preparing for retirement, short- and long-term disability care, and life insurance. Long-term planning is critical to living comfortably during retirement, especially as people are expected to live to their late 70’s and beyond.1 In this article, we take a brief look at the steps you can take to prepare your own financial wellness blueprint.
Determine where you are today: Evaluate your current situation and look at areas such as how much you earn, how much debt and savings you have, what (if any) college education expenses you have, and ongoing medical care needs. These areas are important to evaluate to ensure you have a good baseline as you prepare for retirement and project future expenses.
- Determine your retirement goals: Most people can live on 70 to 90 percent of their current income in retirement, assuming they will not have a mortgage payment or debt. If you earn $80,000 today, you can probably live on $56,000-$72,000 during retirement. It is important to plan what lifestyle you want to have and anticipate expenses you may encounter such as health care cost, travel, or hobbies.
Once you identify how much money you need per year during retirement, multiply that amount by 15-20 years of life expectancy and that will give you an estimate of how much money you need to save for retirement. You can then create a savings goal; it may be useful to use an online calculator such as Bankrate2 to find out how much money you need to save monthly for your retirement fund.
Protect Your Family
If you have people that depend on you, it is important that you have a life insurance policy. In the event of your death, you want to ensure your family and/or dependents will continue to have the same or similar lifestyle as if you were alive. The amount of coverage you need depends on how many years you will need to replace your income, with considerations for things like the number of years there are before your child graduates from high school or college, or if you would need to pay off a mortgage and help provide for a spouse or child care after you are gone. Look at the link below3 to take a more in-depth look into how much life insurance you need.
Protect Important Documents
Put important documents you may need quick access to, such as passports, birth certificates, and insurance policies, in a fireproof safe. Other documents such as deeds, stock certificates or bonds can be kept in a safe box in a bank.
As you get older, health care will be a priority and the cost of care in the event of a debilitating disease is very expensive. Medicare does not cover everything; therefore, it is important that as you approach your mid-fifties or sixties, you consider long-term care protection. Make sure to compare policies and their terms. If you don’t want to get a long-term policy, plan to save for care in your golden years.
Power of Attorney and Living Wills
In addition to the physical effects of aging, our minds age as well. It’s important to designate a trustworthy person to make sound medical and financial decisions for you in case your cognitive abilities decline. Obtain a legal document known as a Durable Power of Attorney (DPOA) to minimize the chances that you might be financially exploited and ensure that your family or someone you trust is making sound decisions on your behalf. A Living will is another legal document that ensures your wishes for end of life care are followed. While sometimes hard to think about, this document is important as it gives your loved ones and medical staff guidance for things such as palliative care, organ and tissue donation, and other medical emergency treatments. Consult an attorney to help you draft either of these documents.
Planning for retirement and the lifestyle you envision may seem too far away or daunting but preparing now—and sticking to your plan—will give you a more comfortable future, financial security, and hopefully, the peace of mind to live worry-free in retirement.
Read the other articles in our Four Steps to Financial Wellness series celebrating Financial Literacy Month: