20s - 50s: A Decade-by-Decade Approach: Full Article

Your 20s

The world of opportunity awaits and retirement seems far away, so why worry about it now? Actually, now is the best time to start thinking about retirement because time is on your side. No matter how little you begin saving now, what you put away for later will give you a big head start on the future. In fact, at this stage of your life, the compounding of savings can allow you to create a sizeable nest egg with relatively little effort. Consider this crazy math: Assuming the same hypothetical rate of 5% return on the savings, a 25-year-old who invests $2,000 a year for eight years and stops investing at 33 can end up with more by the age of 65 than a 35-year-old who invests $2000 a year for 32 years, even though the 35-year-old invests four times as much!* The earlier 10 years of compounded interest makes all the difference. Here's why: When you save or invest in a given year, your money earns interest. The following year, you earn interest on your original money plus the interest from the year before. In the third year, you earn interest on your original money and interest from the first two years. And it goes on and on like a snowball getting bigger and bigger rolling down a snowy hill.

Here are some more common sense things you can do now to ensure you’re “rolling in it” later:

*For illustrative purposes only and does not represent performance of any particular investment. The example assumes no additional savings or withdrawals and assumes annual compounding of interest. The example also does not take into consideration taxes or any fees/expenses associated with investing.

• Pretend: As in make believe you’re still a broke college student, at least when it comes to spending. Forgo all the expensive “grownup” trappings like eating out at expensive restaurants and splurging on your wardrobe in favor of saving up for real adult goals like retirement and life insurance.

• Embark on a tall order so you don’t come up short: Take the time to sit down and identify your short, medium and long-term goals. Short-term may include saving up for furniture, a car, or a honeymoon. Medium-term may be saving up for a down payment on a home. Long-term would include retirement.

• Give yourself some credit: In order to qualify for the best interest rates on a credit card, car loan or mortgage, you’ll need to build a solid credit history. Start now and save later by ensuring you’ll be eligible for the best rates.

• Cut the cord: If a parent or role model is helping you manage your finances, it’s time to take the reins and put yourself in charge. After all, whoever controls your finances, controls your life — and your future.

• Do marry for money: But wait, not in the conventional sense! Your spouse will be your co-money manager so marrying for money here means marrying someone who shares your same financial values or views on spending and saving. You will be a financial team, so it is crucial you are on same proverbial page where money is concerned.

• Put your health first: Make sure you have health insurance. Don’t let an unexpected health issue and the resulting medical bills spoil your financial future.

20s Guidance from the professionals at New York Life:

Irma Perez, Agent, New York Life Silicon Valley General Office: “You’ve heard your mother say if you have your health you have everything and your health really is your greatest asset. But we only realize that when we’re older. So if you’re in your 20s, the time is now to advantage of what you have to build a solid foundation for the future. The younger and healthier you are, the more opportune the time to purchase life insurance. Now may be the best time to get a combination of permanent and term life insurance.”

Eric Chappell, Agent, New York Life Montgomery, Alabama General Office: “I tell young people that their biggest investment is their human capital. They don’t realize that, that they’ll be working for 40-45 years and that’s a lot of earning potential. So at this stage my guidance to them is you must protect your human capital. Consider term insurance in your 20s that you can convert to permanent life insurance later..”

Joel Steele, New York Life Agent, South Jersey General Office: “When it comes to retirement, the earlier you save the better off you’ll be. A smaller amount saved for a longer period of time is worth more than if you waited to start saving larger amounts later. The sooner the better so whatever you can afford, start with that.”

Your 30s

No more excuses! You’re a grown-up by anyone’s definition, so it’s time to get serious about your financial future. Your 20s may have been spent getting to know your worth out on the job market, making some spending mistakes and possibly not putting saving for retirement on top of your priority list. One big change right now is it’s likely not just about you anymore. Now you may have to consider a spouse and/or children when planning for the future. And that means you’re probably dealing with a growing paradox: You have more financial responsibility and expenses, but also the need to save more. Don’t be thrown off track by short-term moves in the market and don’t get distracted by the headlines. Stay on course. Your best friend is still Time, allowing you to weather the ups and downs of the economy. Historically, a disciplined long-term investment approach has been the best way to go.

Here are some things you can do right now to tackle the challenges and come out ahead:

• Get rid of it: Eliminate nonmortgage debt. Nothing frees up cash for your growing family responsibilities like paying off high-interest loans. If you didn’t take care of credit card debt in your 20s, now is the time to do it. Student loans and car loans come next.

• Be a number cruncher: It’s time to sit down and do the math. If you started saving a little here and there in your 20s, now is the time to get serious about putting some real financial plans in action. Figure out how much you need to retire and start saving when time is still on your side.

• Put yourself first: Don’t save for your kids’ college tuition before saving for retirement. After all you can take out a loan to pay for college, but no one will give you a loan for retirement!

• Spread the wealth: Diversify your investments to protect your portfolio in case one sector tanks.

• Ask the hard questions: Plan for the “what ifs” by insuring what you’ve got. Homeowners insurance, health insurance, disability insurance and life insurance are all crucial parts of the plan.

30s Guidance from the professionals at New York Life

Irma Perez, Agent, New York Life Silicon Valley General Office: “At any age, in my opinion, permanent life insurance is the most misunderstood financial tools. If more people understood how it works and all the advantages it offers, there would be a long line out the door trying to buy it! If you’re in your 30s, look into it now and learn about all the features and benefits like guaranteed death benefit*, guaranteed cash value accumulation, tax deferred cash value growth and generally tax free access to cash value via policy loans**.”

*All guarantees are based upon the claims-paying ability of the issuing company. ** Policy loans accrue interest and reduce cash value and death benefit.

Joel Steele, New York Life Agent, South Jersey General Office: “Think about retirement planning. Great to get it going in your 30s. Like many of your generation, you may not have a pension or any other benefit so you need to be more proactive with your personal retirement strategy. ”

Rakesh Bansal, New York Life Agent, Princeton General Office: “People always ask, ‘how much insurance do I have to buy at this stage of my life?’.” The simple answer is you need to make sure the insurance you have can fully replace your current earned income.”

Your 40s

You may be in the prime of your career with many financial strategies already in place. If so, it’s time to take another look at what you have and really take stock of your goals. If not, fear not, because it’s never too late to begin preparing for the future. You’re in the middle of your game with 20 years of work behind you and at least 20 good years ahead, so think positive and get on the right track. Now is the time to prepare for the second half of your career — and beyond. If you are fortunate to be enjoying disposable income now, don’t dispose of it! The smartest thing you can do is put off enjoying extra cash now so you can really benefit from its maximum potential later.

Here’s what you should be doing now to secure your family’s future:

• Create a master plan: Figure out when you want to retire, how much you want to earn each year and create a realistic map to reach your goals.

• Sock it away: Once you know how much you’ll need, get disciplined and save, save save.

• Don’t skimp: You may have more expenses than ever, but keep in mind that every dollar you fail to save now could cost you $10 in retirement income.

• Keep a close eye out: Scrutinize your retirement plan every couple of years. Make sure your investments are living up to your expectations.

• Embrace change:Be open and flexible to changing your retirement age and rate of savings as the economy and your portfolio’s performance changes.

• Protect your loved ones: Make sure the beneficiaries on all your accounts are up to date. If you don’t already have one, create a will. And determine if your life, disability and homeowner’s insurance provides enough coverage for your family’s needs.

40s Guidance from the professionals at New York Life

Irma Perez, Agent, New York Life Silicon Valley General Office: “Education funding becomes very relevant. Think of paying for college as a team effort. The kids can get a scholarship or borrow from you to help pay tuition. Just like in a plane, you have to put your financial oxygen mask on first and be financially stable before you can help your kids.”

Rakesh Bansal, New York Life Agent, Princeton General Office: “Now may be the time to consider a permanent policy with the power of guarantees over time. It is going to cost you the first couple of years. But once you understand the value of permanent insurance - death benefit that does not expire (as long as you pay your premium) and cash value build up - you can see how this can be of great benefit to you.”

Joel Steele, New York Life Agent, South Jersey General Office: “Review what you have; you always want to make sure your insurance is current and relevant. You need to be certain you’re covering a realistic amount. It has to cover a total loss of income and must include debt, student loans, credit cards, mortgage, etc. You want to make sure your family is not going to barely scrape by and will be able to cover all their expenses.”

Your 50s

It’s never too late to begin planning for retirement, but if you’re in your 50s, time is of the essence. The good news is, Americans over 55 are contributing to the economy in record numbers, and you still may have 10-15 peak earning years left to reach your goals. By now, many larger expenses like your mortgage may soon be behind you so it’s time to get serious about evaluating plans that are already in place and saving more aggressively to reach your goals.

Some of you may be looking at your existing retirement plans to see if they are on track. Others may have held off and need to get a retirement plan established. Either way, you should have a very clear idea of how much money you will need to retire comfortably. At the same time, you’re entering the transition phase where you have less of an appetite to weather market volatility. What you need now is broader diversification of investments to provide some stability (of course, diversification does not assure a profit or protect against market loss).

And remember, since you’re in your peak earning years, you should maximize your 401(k) by making sure you are contributing enough to take advantage of your employer’s full match. Here are some more basics to keep in mind now:

• Look out for Number One: No more distractions, your retirement plan has to be your first priority now.

• Be Calculated: Estimate living expenses and determine what your accounts will be worth when you retire. There are calculators on the Internet that can help you with these figures, or you can contact your financial professional to give you a more accurate number.

• Consolidate: If you have worked for several employers over the years and have accumulated a number of smaller plans, consider consolidating them. This will help give you a clearer picture of your plan’s overall performance and can make managing your portfolio simpler and easier. Note, however, your investment choices may be somewhat limited if you consolidate your investments.

• Make it an obsession: It’s important to pay very close, frequent attention to your financial plans. Review, review, and review some more. At this stage, your portfolio and estate planning goals need constant attention.

• Do a balancing act: Assess the risks and rewards of your various investments. Keep an eye on the mix of stocks and bonds in your retirement portfolio and make sure you are looking at the percentage allocated to each type of investment at least once a year. Redirect future investments or rebalance your portfolio between asset classes as necessary.

• Play catch-up: Part of the Restoring Earnings to Lift Individuals and Empower Families (RELIEF) Act of 2001 allows you to aggressively build your retirement account now, and in some cases catch up on lost time. But also keep in mind the IRS has specific catch-up limits that apply to individuals 50 and older. Ask your financial adviser or accountant to help you do all you can to maximize your nest egg now.

50s Guidance from the Professionals at New York Life:

Tema Steele, New York Life Agent, South Jersey General Office: “Don’t be one of those people who just had term insurance and is forced to drop it when the premiums come up, or you’ll be one of those people who’s left with nothing. Be sure to convert term into permanent while you still can. The goal is to always have coverage in place.”

Rakesh Bansal, New York Life Agent, Princeton General Office: “If you’re in your 50s you really should have permanent life insurance. If you missed out on buying it before, don’t worry because it’s never too late, and you can still achieve permanent protection for your family and gain access to guaranteed cash value accumulation over time. Also, it help you to spend down other assets on a comfortable basis without worrying about preserving assets for your children.”

Richard Miller, New York Life Managing Director, Retirement Income Security: “Now that you’re in your peak earning years you will want to keep more of what you earn. Consider investments that provide tax-advantageous, stable retirement income.

Dylan Huang, Corporate VP, Guaranteed Income Annuities: “There are many common myths about annuities. One is that if you give a large sum of money to the insurance company and you don’t live as long as you expect, the insurance company keeps the money. Another myth is that an annuity only gives you access to a set amount of money each month. Not true. Many income annuities come with optional features and payment options that address those concerns.

People have many ways to invest for retirement: One is to buy annuity. Another way is to put money in the market and let it ride. The difference is there are no guarantees with the stock market. But a fixed income annuity is something that actually allows you to purchase a “guarantee” in your overall portfolio.”

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