I try to ignore the mail from AARP. Sure, I know a membership will get me discounts on everything from hotels to hearing aids, but it’s just not a club I’m eager to join.
Am I in denial? Absolutely. I’m resisting retirement and avoiding thinking about the passing years. I end up rescheduling more meetings with my financial advisor than I show up for.
Yet at 53, I’ve vowed to confront the truth. Time is marching on, and it’s time for me and my wife to get serious about our financial future instead of putting it off for tomorrow—or next year.
Part of this epiphany is just common sense. Part of it is the result of a good dose of research I’ve been doing for some recent articles I’m writing about financial planning.
Here are five takeaways from that research that are motivating me to take action.
Time is not on my side
This is not a new revelation. I learned the fundamentals of compounding interest and dollar-cost averaging decades ago. Yet back in my 20s, the urgency—or the cash flow—wasn’t always there. My wife and I have built a decent nest egg, but it could definitely stand to grow. The reality is that time can still work for us if we take some proactive steps now. The best way to get a cold dose of reality is to tap one of the many retirement calculators that can provide a better picture of where you stand and what it will take to hit your financial retirement goals. Among the many available are Bankrate.com, AARP, and Kiplinger.
Life insurance can be my friend
I’ve discovered that life insurance can be a valuable tool when it comes to retirement planning. Beyond making sure your loved ones are taken care of after you die, it can also be a key piece of your financial planning strategy, as well as a potential source of ongoing income.
Retirement income expert Curtis Cloke recently told Forbes that a 10– to 15–year term life insurance policy can provide a solid safety net for a couple in their pre-retirement years if they are focused on playing catch-up on retirement savings. It can also serve to protect your retirement savings, and the premiums can be relatively inexpensive. However, you may need a permanent policy in the future, so consider a convertible policy in order to ensure you can make that change when the time comes.
Life insurance can also serve as one of the safer financial instruments you can add to a retirement investment portfolio to generate ongoing income. A whole life policy might be a good move in the current climate, where bonds and CDs are less attractive due to historically low interest rates.
I can’t invest like a 30–year-old
I’ve always been a bit of a risk taker when it comes to investing. Remember WorldCom? Yeah, I owned stock in it. (For those who aren’t familiar with WorldCom, consider yourself lucky.) Conversely, taking a more aggressive approach with individual stocks and index funds has paid off in my 401(k).
Yet in my current stage of life, I can’t afford to be too risky. The soaring stock market won’t soar forever, and if there is a sustained downturn, we might not have time to recover. Investment experts generally agree that by age 50, retirement investments should be about equally split between stocks and bonds. As time passes, the percentage of bonds or other less volatile investments should increase incrementally to soften the blow of a big downturn in the stock market.
Going it alone can be risky
In my retirement investment strategy, I’ve ping-ponged between going it alone, to having fully managed funds, to my current state, which is a hybrid of the two. These days, I’m relying more heavily on my financial adviser. I don’t have the time or expertise to stay on top of it on my own, and missteps that might have been less of an issue 20 years ago could now exact a hefty price with my shorter time window.
This, of course, if a personal choice. You end up paying for an adviser one way or another. But in my current situation, the return on investment is likely worth it. With this plane getting closer to landing, I want a seasoned pilot at the controls.
This circles back to my original point. Every day I put off developing a clear plan for our financial future and executing on it is one more day I lose the benefit of compounding interest or having a detailed roadmap to achieve my financial goals. Avoiding the topic won’t make it go away.
The clock is ticking. It’s time to take action.
I might even sign up for those AARP discounts. Never know when I could use a deal on hearing aids.