The Internet is a helpful tool for the savvy DIYer.
Want to build a tiny house? Videos abound to show you how. Can’t figure out why your dryer quit heating? You can peruse trouble-shooting videos until the cows come home. Interested in developing your own financial plan? You’ll find resources galore online.
In honor of National Financial Planning Month, I’m sharing six factors that often get overlooked in DIY financial plans.
1. The Cost of Early Retirement
Raise your hand if you’d like to retire before 65. Have you considered the cost of ending your income-producing years earlier than you can begin collecting Social Security (the earliest is 62, with some exceptions) or go on Medicare? Did you know that tapping into IRAs before age 59 1/2 typically results in a 10 percent penalty? Are you confident you’re saving enough money to last 30 years or more? Don’t underestimate the cost of private health insurance when retiring early.
2. Losing a Spouse
We don’t think about this often, but our loved ones sometimes leave us sooner than anticipated. Should your financial plan include life insurance for you and your spouse?
If you or your spouse will receive a pension, research your survivorship options before you retire. Choosing survivor benefits may result in less pension income in retirement for you, but it will ensure those payments continue for your spouse after your death.
3. Helping Adult Children in Crisis
Many parents financially assist their adult children these days by covering costs including mobile phone bills, AAA Roadside Assistance and private school for grandchildren.
Something to consider is whether you assist your children to your own financial detriment. People live longer nowadays. If you outlive your retirement funds, are your children financially equipped to help care for you?
4. Eldercare Needs
Someone turning 65 today has almost a 70 percent chance of needing long-term care services in retirement, according to LongTermCare.gov. This can include medical and nonmedical care for chronically ill and disabled people. Long-term care services assist people with daily living activities, such as using the bathroom and preparing meals.
Consider whether long-term care insurance should be part of your financial plan.
The rising cost of goods and services impacts purchasing power. If your expenses exceed your planned income, you could run out of money in retirement. Do you know whether you’ve saved enough? Are your retirement funds invested in a way that will grow your nest egg to hopefully keep pace with inflation?
6. The Bucket List Blues
I once met with a couple who wanted a $20k/year vacation budget in retirement. The problem? Their goal was unrealistic, given that they were in their 40s, had no retirement savings, and didn’t earn enough to play catchup. My biggest concern for them was accumulating enough nest egg to cover basic living expenses in retirement. You must get real about what is achievable, and retirement planning can help you do that by giving you an idea of how much to save today to increase your likelihood of having enough to achieve future goals.
Get a Professional Financial Plan
I admire the DIY spirit. However, if there’s any doubt that your financial plan accounts for everything, why not let a financial advisor who builds plans for a living help?
Your first financial plan becomes a baseline. We revisit them annually and make updates as your life changes.
Please call to schedule an appointment for a financial plan. If you like what I create, let’s talk about coming on board as a client.