New York Estate Planning & Elder Law Blog
Each decade of life ushers in a new set of challenges and issues for financial and estate planning. In your 20s, you are trying to establish yourself as independently financial and pay off your student loans. In your 30s, the estate and financial focus typically turns to planning for a family.
There can be more complications in your 40s, where you must balance supporting your children in addition to yourself and possible your parents. This decade is also crucial because there is still enough time before retirement to significantly affect your future. Here are some financial and estate planning moves to make before you turn fifty that can keep your retirement plan on track.
Increase Retirement Plan Contributions
By the time you are in your forties, you have hopefully paid off your student loans and hit a solid point in your career, allowing you to allocate more money into your retirement accounts. You should consider ramping up the amount that you set aside in retirement accounts every pay period. If you delay into your fifties, you will not have the compound interest working in your favor.
By increasing your contributions, you can also take advantage of any employer matching that takes place. If you have already maxed out your contributions, look into whether your employer offers other tax-advantaged options for retirement like a 457(b) plan.
Recalibrate Your Risk Tolerance
Now that you are nearing retirement age, you should also consider recalibrating the amount of risk that you are willing to take with assets in your estate. Called the “Rule of 120,” this method helps you determine the appropriate balance of stocks and bonds in your portfolio according to your age and time until retirement.
The rule is simple: subtract your age from 120, and that number is the percentage of your portfolio that should be allocated to stocks. If it still seems too aggressive, try subtracting from 110. Discussing these plans with a financial advisor and estate planning attorney can help you find the right mix for you.
Prepare with the Right Insurance
Over seventy percent of people over the age of 65 will require some form of long-term health insurance during his lifetime. Forty percent of those people will need nursing home care, and the chances are likely that you will have to cover most or all of the costs of care. By shopping for long-term health insurance in your forties, you will be able to afford any medical assistance that you may need later down the line.
At the same time, you should be looking into getting a life insurance policy as well. Many people in their forties have others that depend on them, and life insurance can cover their needs should anything happen to you.
Get Your Other Estate Planning Documents in Order
Many people in their forties have amassed some level of assets, and your estate plan serves to protect what you own. Estate planning tools give you control over the distribution of your property, allows you to designate custody of minor children or pets, and ensures that your loved ones are taken care of after you are gone.
In addition to drafting any documents that you have put off writing, be sure to also double check your existing documents. This includes anything outside of the typical estate plan, like accounts and policies with beneficiary designations. Update any forms, documents, or lists of digital assets, too.