Financial Goals: What To Do In Your 50’s

Just Like The Dave Chappell Show, It’s Time To Wrap It Up…

Even if you’re just dipping your toes into your 50’s, the thought of retirement is on your mind. You now have less than 15 years or so to get your Sh#T together.

So, what should you be doing at this point?  Well, first of all, you should be going back on Kelly’s blog to revisit all the items in your 20’s through 40’s and checking off all those items first. Click the links at the bottom of this post to see the previous articles and get caught up!

Back to the BIG 5-0…

I’m now talking to you about Retirement Benefits Analysis, Long Term Care Insurance, and Estate Tax Strategies. Also known as: running out of money, living too long and paying too much in taxes.

Retirement Benefits Analysis is a fancy way of saying that you’re planning to not run out of money. You have to understand (or start to) that one day women at work will be replaced by capital at work. This concept is assuming that you will cease to work, at least full time, and will begin to transition from a reliance on your paycheck, commissions, bonuses, or whatever, to a reliance on the money you have saved and how much income those saved funds provide each month.

This working retirement capital will be created by outside investments, 401k savings, a pension plan (if you’re lucky), and social security. Here we have the big 3 to consider:

1. How much money will be required at retirement 

2. How much income it will produce

3. And how long it will last

I don’t know about you, but I think it’s easier to back into your retirement goal, #1, by calculating #2. So, let’s take an example that might help you picture it a little easier. Let’s say I’m making $120,000 per year of income and I want to keep at least that amount of income in my retirement years, to maintain my current lifestyle. In tomorrow’s dollars, because inflation, you would need an annual income of around $178,000. That wouldn’t be a total replacement because this would also have your hopeful Social Security Benefits added in, as well. As a total number, you would need approximately $2.1MM saved somewhere that you can draw an income from. Again, these are just quick estimates to help you with evaluating your situation and where you need to step up your game.  

One concept I’d like to introduce to you is the 4% Rule.  Since the mid-90s, most financial people used this as an average when calculating your retirement income. We’d take the total amount of cash, investments, etc that you had saved and multiply the total by the 4% to determine how much you can withdraw, on a consistent basis, and not run out of money. Well, guess what folks? A PHD economist re-ran those calculations a few years ago and determined that our well-used 4% is now down to 2.8%.  He attributes the lower number to market volatility and people living longer. Let’s look at another example, shall we? If you worked hard all your life, marching into our retirement planning meeting as a millionaire ($1M to be exact), and then I tell you congratulations! You’re a millionaire, but you can only live on $28,000 per year? You’d slap me in my face!! Well kids, that’s what you’re looking at. Now I’m not telling you this to be mean, as my 6 year old would say. Or to be a “Karen.”  I want you to be prepared like the little Girl Scout you are.

The key with retirement planning is that you’re saving as much as you can, and getting creative with where you save. Want to know the trick to actually saving more? Check out my blog post on Your Money Funnel, and completely change the way you look at your money.

“The key with retirement planning is that you’re saving as much as you can, and getting creative with where you save.”

Now let’s discuss Long Term Care Insurance, also known as, Living Too Long. Your 50s are a great time to look at LTC insurance because it hasn’t gotten ridiculously expensive yet. But, why should you care about this insurance, much less want to pay for it? In its simplest form, LTC is a type of insurance that you buy to cover some or all of your nursing home/assisted living/independent living expenses. Depending on the coverage, it might only cover a portion of it. LTC coverage is usually quoted with a daily rate, because that’s how these facilities usually work. According to Genworth’s Cost of Care Survey, on average in the United States, a private room in a nursing home costs $8,365 per month, or $275 a day. For a semi-private room, the average cost of a nursing home is $7,441 per month, or $245 a day. Yikes! That is one expensive apartment!  So, you have a choice to either buy the insurance, or cover the cost yourself. Neither answer is wrong, but again, preparation is key.

Hot Tip! 

Many employers are beginning to add LTC coverage as part of their employee benefit program. Check with your HR department to see if that option is available for you.

Last, but not least, you need to consider how you will sell your financial dream home. When I say that you will “sell” your financial dream home, I mean that you will die. And how will you pass along your accumulated wealth/money to your heirs, without degrading the amount with taxes? When my Pappaw passed away, he left my dad, my sister and me an inheritance. Because he did not have any provisions to cover the tax bill, our inheritance was cut in half and the other half went to good ole Uncle Sam. Even if he only left me $2000, I DID NOT want to give that $1000 to the government. I don’t know about you, but I pay PLENTY of taxes while I’m alive, so I don’t want to give any more than that. In 2020, and depending on the amount you’re leaving behind, your estate tax bill could be upwards of 40%. Wowzers!  If I leave my daughter $1MM, then $400,000 goes to the government.  Is that what you’re hoping for? For me, that a big NO WAY! So, what did I do? I’ve purchased a life insurance policy (way over the $400,000 needed) that will cover any tax bill she might receive.

I so appreciate the opportunity to chat with you on She’s a Full on Monet about all things financial!  Make sure to check out my podcast and blog, www.southernfriedbusiness.com.  I’ve got loads of information there that will be able to help you and get your money organized, in true Marie Kondo fashion.  Let’s connect so you can take control of your checkbook and live the life you once dreamed of.  I hope to see you again here soon, but in the meantime, I think we go together like peas-n-carrots.  So, let’s keep the conversation going over at www.southernfriedbusiness.com.  

 Till next time, Money Mavens…

About Connor Morganti

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Connor Morganti is a Southern gal with big ambitions. She’s a financial advisor, money educator, blogger and new podcaster known for her passions of: animal rescue, Keto, being an Old Lady with a Baby, and her endearing sense of humor. She helps {mostly} women Fund Their Lives and Own Their Destiny by using their business income to level up. She’s obsessed with abundance and loves to teach women about money through strategies. She coaches on asset basics and savings methods through in-person meetings and online courses. You can always find her on social, but feel free to sign up on the blog too! >> www.southernfriedbusiness.com.