Teaching Retirement Principles to your Kids

Very few teenagers and young adults give much thought to retirement because they think that there is still a lot of time ahead of them to plan for this part of their lives. However, there are a few ways in which parents can help their teens and young adults to understand how important it is to plan well in advance for this time of their lives. 


Find out what they are Expecting

An excellent way to instill retirement principles into your kids is to find out from them what they want to do with their lives. Would they like to retire early, travel as much as possible or buy a yacht, or do they simply want to earn a good living and retire sometime between 65 and 70? 

Either of these scenarios requires a lot of planning to execute, but it is possible for you to help them figure out how much their life plan will cost them (be sure to take inflation into account) and what it would take for them to be able to achieve these goals. 


Let them know that Circumstances will Change

Previously, most individuals relied entirely on their pension funds and Social Security to get them through retirement. However, these are no longer as reliable as they used to be, with Social Security now only paying out around 75% of planned benefits after 2033 and Medicare funding looking just as negative. 

This means that retirement will be completely different for anyone in their 20s, so it’s essential that they start focusing on retirement planning as soon as they become employed. As a result, you will need to teach your kids that it’s no longer a safe option to rely on any form of government funding when they retire. 


Teach them that More is Better

As we get older, we end up having to deal with several uncertainties in life. Some may pertain to health, while others pertain to employment status or other personal circumstances. Although the current age of retirement in the US is 65, Social Security will actually pay a higher benefit to any individual who continues working until they turn 70 – or even older. 

Keep in mind that it’s almost impossible to assume at the age of 25 whether you will still be physically able to work when you reach the age of 70. As a result, it’s essential to plan in such a way that you’ll be able to afford to retire when reaching the age of 55. This way, you will be able to save additional money towards your golden years if you’re still healthy enough and willing to work when reaching 70. 

As you can see, teaching your kids about how they can plan ahead for their retirement years need not be as complicated as you think. Everything comes down to them knowing how they would like to spend their lives when they are older, and showing them how they can achieve their financial goals with the right amount of planning. 

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Can you Save for Retirement and Pay for your Kids’ College Simultaneously?

While there’s nothing wrong with parents who focus on their kids’ goals with regards to college, research has indicated that more and more parents are now doing this at the detriment of their own retirement. Although it’s OK to provide support to your kids while they’re in college, it can be extremely difficult to balance that along with your own plans to retire in a decade or two. 

Firstly, it’s crucial to determine how much you will be able to comfortably set aside for your own retirement as well as your kid’s college costs. All of these expenses must be considered in conjunction with each other so that you can see where changes might need to be made to one or both of them. 

Here are some questions that require honest and direct answers because they will help you determine what your financial limitations are:


Covering College Expenses

  • Are you going to pay for all or part of your child’s college journey?
  • How many years are left before your child starts college?
  • Will they attend public or private college?
  • Do you think your kids will qualify for any form of financial aid?
  • Will grandparents or any other family members be contributing towards college costs or not?
  • If your kids have specific academic, artistic or athletic abilities, id there a chance that they would be able to qualify for any scholarships?


Covering Retirement Savings

  • How do you want to live after you’ve retired? Do you want to simplify your life or would you like to travel more?
  • Does your current employer offer any form of retirement or pension plan where matching contributions are provided?
  • How many more working years do you have left before reaching retirement?
  • Will you or your spouse still work part-time after officially retiring or not?
  • Have you already got a Roth IRA or other form of IRA in place?
  • Are you going to need Social Security benefits to assist with your retirement? If so, it’s essential that you check online to see the amount you’ll qualify to receive
  • What sort of income are you expecting form your existing retirement account balance?


What you can do if it’s not Possible to Pay for College and Retirement

In cases where it’s just not possible to pay for college and secure your retirement financially, you might need to ask:

  • Will you be content with delaying retirement by a few years in an effort to boost savings balances?
  • Are you willing to cut back on living expenses now or after retirement? You may be able to reduce expenses right away in order to have enough money later on or you can think about reducing spending once you’ve retired
  • Are you willing to keep working into your retirement years?
  • Will you be willing to make investments that are more aggressive? (This might not always be a good idea)
  • Will you be willing to have your kids attend more affordable colleges or contribute towards their college costs?

It’s essential that you not wait until your kids have finished college before you start saving for retirement because it will be almost impossible to save enough money to live on. If you require more information about being able to retire comfortably and still contribute towards your kids’ college education, get in touch with us today. 

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Why you should Hire a Financial Adviser to Help with Retirement Planning

Financial advisers possess extensive knowledge when it comes to helping individuals to prepare for and achieve their long-term financial goals. They also have the ability to provide you with much-needed guidance when it comes to planning for major life events along the way such as purchasing a home and ensuring that you’ll be able to retire comfortably. Below are a few reasons why it makes sense to work with an accredited financial adviser. 


The Economy can – and will – Change

You may intend retiring with a lump sum of $500,000 in the bank. While this may be a fairly reasonable goal to achieve for many working folk, it’s important to take the fluctuating economy into consideration. For instance, a dozen eggs and a gallon of milk may cost you $6 today, but how much will these essential set you back by the time you retire? 

Your savings may not stretch as much as you had planned, resulting in financial difficulties during retirement. A financial adviser can help you to plan ahead so that your savings accounts and investments take inflation into account. 


Unexpected Events Occur

You may be in your 30s at the moment, with a good-sized 401(k) account and fantastic job that you love. While everything may be going according to plan at the moment, what would happen if you were suddenly unemployed and you needed money urgently? Dipping into your 401(k) will not only set you back with penalty fees and additional taxes; you will be robbing yourself of potential interest that could have been earned on those funds as well. A financial adviser will assist you with allocating your funds in such a way that you’ll be able to deal with unexpected life events without compromising your retirement savings. 


You may be Wasting Money

Several individuals earn more than enough to be able to save and invest towards retirement, but seem to experience difficulties in finding the money to contribute to an IRA or other type of investment plan. Financial advisers specialize in the area of budgeting, meaning that they will be able to help determine how your money is being spent and whether any cutbacks can be made. 

For example, you may be spending too much money on takeout, cable channels and other subscriptions. While these may only add up to a few hundred dollars a month, this will certainly add up substantially if it’s invested over a period of 30 to 40 years and not spent immediately. 


Your Health could Deteriorate

Although most individuals are healthy when they begin their retirement savings strategies, unexpected illness could derail everything. Your financial adviser will be able to work with you to help allocate funds to cater for potential situations like these. 

Although many people think they know enough to plan for their retirement without having to pay an adviser, the truth is that circumstances can change completely unexpectedly. Having an accredited financial adviser on your side could make all the difference between being able to meet your financial needs or rely on Social Security during your golden years. 

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Financial New Year’s Resolutions you can Make

Although you may not have started planning for retirement yet, or you’ve experienced personal circumstances that resulted in you delaying contributing to existing savings and retirement plans, this doesn’t mean that all is lost in this regard. In fact, there are a few financial new year’s resolutions you can make that will help get your savings plans right back on track again.


Enlist the Help of a Financial Adviser

If you aren’t working with an accredited and reputable financial adviser yet, now is the time to add this to your list of resolutions. Although retirement planning may seem relatively simple, the truth is that it can be quite complex – especially where tax laws and economic changes are concerned. Hiring a financial adviser will help ensure that you get your retirement planning on the right path from the beginning.


Find New Ways to Save Money

Although you may already have a 401(k) or some form of IRA account, you might find that you aren’t contributing as much as you want to them yet. If this is the case, start searching for ways to cut on expenses. For instance, could you get by with a cheaper phone or internet plan? (The answer to this in most cases would be yes). Are you paying for cable TV that you never watch? Even reducing the amount of times you purchase takeout in a month could make quite a big difference to the amount of money that you could be setting aside for retirement. 


Start Contributing to Dedicated Retirement Plans

If you don’t have an IRA or 401(k) in place with your employer yet, be sure to get this started as soon as possible in the new year. These are by far the two best options when it comes to saving for retirement, so the sooner you can set them up, the better. Keep in mind as well that these contributions are pre-tax, meaning that you will probably not even notice these amounts being deducted from your paycheck at this time – but you’ll definitely notice the difference when it’s time to retire. 


Repay Outstanding Debts

Your goal should be that you will be completely debt-free when you retire. Too many individuals make the mistake of thinking that there is still a lot of time to get their debts repaid, so they don’t treat them with any form of urgency. Unfortunately, this can result in them still having large mortgages to pay – while no longer earning a decent income. As a result, it’s strongly recommended that you start strategizing now to get all of your debt repaid as quickly as realistically possible. 

Although everyone looks forward to the day that they will no longer need to report at the office, you will only be able to truly enjoy your golden years if you have planned ahead with regards to your finances. If you would like to find out more about hiring a financial adviser or setting financial goals, contact us today. 

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