Financial planning through the decades

As a mother of four teenage daughters👩‍👩‍👧‍👧, with a financial advisory practice encompassing clients from ages 20 – 80+, I’ve learned a lot about important financial steps to take at every age. While the tips below do not make up all of the secret sauce🥫 to a healthy financial life, they are a few of those I’ve found most important to consider at any phase. If you find you’ve missed things specific to your age – FEAR NOT! It is never too late🏃🏻‍♂️ to get started, and by all means, don’t let your fear paralyze you into avoidance of starting to plan 🗂your financial life.

I hope you find these tips useful. I’d also love 😻 to hear if you or your family or friends would have other tips to top the list below – please share them with me so I can include them in future updates! Now let’s get started.

Teenage years:

1.    Have your teenagers work – a real job . This does not need to be a fancy white-collar office job, but rather any job where they do honest work 👷🏼‍♀️, and receive an hourly rate for their time. 

This will teach them the basics of what it means to be a productive citizen. It will hopefully also teach them to show up for work on time ⏰, dress appropriately, pitch in when necessary, respect their elders, ask questions ❓, be curious, learn customer service, understand when it is ok to say no to a customer, or when allowances should be made to ‘keep the customer happy.’ 🤩

My girls have been blessed with really great jobs this summer, working with both a local entrepreneur and in a local market. I love listening to their stories, and what they have learned, such as what it means to keep looking for more work to do even when others have ‘called it a day’; lessons on ‘managing up’ as well as ‘managing down’, how to roll up sleeves, pitch in 🧹, and ultimately win the respect of bosses based on their own hard work and positive attitude 😅.

2.    When your teenagers do work, consider opening a ROTH IRA 💰for them, and matching their earnings with a contribution to their IRA (if they are still considered minors in your state, you may have to open a Beneficiary Roth IRA). And then sit with them to discuss how those funds will be invested. They will be so far ahead of their peers later on! Please note that a Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are taxfree. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

3.    Get them involved in the saving/paying for college discussion early. This is one area where I believe families have a lot to learn. Many parents I work with start saving in 529 plans early, which is great 👊. If they have the means, they will continue to contribute monthly, while the child is young. If they are lucky, there may even be grandparents who contribute as well (this is a great place for grandparents to make birthday and holiday gifts🎁). However, in spite of saving regularly, the funds typically do not even come close to paying for their entire college bill (which, at a private college in the US, can still top $300k for 4 years!). Please note that prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

This is why I HIGHLY recommend families have the 💵 money discussion when the child is starting high school. I see way too many families expecting financial aid or sports ⚽️ scholarships to cover a large part of college costs, when in reality, this is seldom the case. There are, however, strategies to obtaining the right education at the right price.

College years:

1.    While in their college 👩🏾‍🎓 years, work closely with your child to truly understand the impact of student loan debt🏦, how much to take on, and what it means post-graduation. A typical rule of thumb is to only take as much debt as what your first year’s salary will pay. So if you’re a social worker who will earn $40k/year, that is where you should max out - $40k of debt TOTAL for your four years in school. If, however, you’re a female software engineer – your starting job may pay you $80k or more – thus, you have more wiggle room in the amount of debt you could handle upon graduation. Run the numbers showing those future loan 🧾payments, versus all their other expenses.

2.    Start to build your credit score, but ONLY by paying off your credit card bill in full every month📆. Do NOT use your credit card to play. Consider it truly as a convenient way to access cash in your account on a temporary basis – but set that bill up to auto-pay in full from your checking account each month. Auto-payments are one of the biggest secret in the financial planning world – financial planners love to automate savings, investing, bill-paying, etc. Once automated, it takes some effort to change/cancel – so inertia winds up working in clients favor – they just keep saving!

3.    You should be working for money 💵 at every opportunity. For some, you may feel that your school workload only allows you to work during the summers, that is ok. For others, you may realize you have extra time each week – in fact, by adding a part-time job to your schedule, you may find it helps you balance your time appropriately and you can actually get more done otherwise. There is a saying that if you’d like to get something done, ask a busy person! 👍🏽 

Twenties:

1.    Once you’ve graduated from undergraduate in your twenties, you’re ready for your first ‘real’ job, unless, of course, you’re heading on to grad school. Before you accept your job, be sure to create a budget of ALL of your expenses 🧾, to be sure you can afford to live/work where you want. For example, you want that investment banking job which will have you working 18 hour work days, can you afford to live close to the office, so you don’t have to add a commute OR an expensive UBER 🚗 ride home at the end of a long day? Conversely, if your consulting job will have you travelling for much of the year, perhaps you could rent an apartment in a cheaper area, or have multiple roommates 👨🏽‍🤝‍👨🏾, as you won’t be living there much, anyway. 

Don’t forget to include your student loan payments, car payments, and insurance payments, to your budget which will very likely include several subscriptions, like cellphone, Netflix, Spotify 🎧, whatever – while they do make your life easy, they also all add up – and, where auto-savings works great for savings, here those monthly 🗓 subscriptions can also work against you by making it hard to stop them.

2.    Contribute to your firm’s retirement plan! Ideally, you’re starting somewhere that offers a corporate retirement plan such as a 401k or 403b. Sign up immediately, and contribute at least as much as you need to receive the full corporate match. AND consider choosing the ‘auto-escalate’ option – which will increase your savings each year automatically. 

In financial planning world we call this, “Paying yourself first” 👍🏽 – if you get in the habit at an early age, of paying yourself first by contributing to your long-term retirement savings, you’ll get started on the right track for a healthy💪🏽 retirement account in your later years.

3.    Really understand and take advantage of the entire array of corporate benefits offered to you. Sometimes firms offer education credits – can you take a night class👩🏾‍🎓? Sometimes they will offer free trainings in certain areas – take advantage of every opportunity presented to you. You will build out your strengths and set yourself up for positive career growth down the road 🥇. 

4.    Take care of your health! Exercise 🚴🏻‍♂️ regularly, maintain a healthy weight, do NOT smoke, or Juul, do not do drugs💉, and keep your alcohol 🍷consumption at a minimum. Younger clients may not realize that taking care of your physical health will keep your financial costs lower – and not just in terms of medical expenses. And, it can potentially add years to your life. I’ve seen way too many smokers who wind up with rapidly declining health just at the time when they should be enjoying a slower pace of life, having fun in retirement, and keeping up with grandkids.

Thirties:

1.    This is often the decade of juggling kids 👩‍👧‍👦 and career. I advise my couple clients to try to keep both spouses in the work force if possible, and to continue contributing to their retirement accounts. Sometimes it feels like one is working only to pay for childcare costs – but ideally you may make it back by not losing ground in your career and wage growth.

2.    I tell all adults that once they have spouses, and especially kids, they need private life and disability insurance. ⛑ (Please note that life insurance guarantees are based on the claims paying ability of the issuing company). Most people think that what they are offered via work is enough. In most cases it is NOT enough. Further, when you leave that job, or get laid off, you’ve now lost that coverage. So the earlier you can get private coverage the better – just be sure to account for this monthly or annually in your expenses.

3.    You should also be sure to draft an estate plan. 💼 Your will allows you to determine who would be the guardians of your children if both spouses are deceased. You’ll also need a Durable Power of Attorney (allows someone to pay bills on your behalf) and a Health Care Proxy (allows someone to make health care decisions if you are incapacitated)🚑. 

You may also need a family trust, among other things. Work with an estate planning attorney who explains things in terms that you understand and keep peppering them with questions until you do. In fact, I often counsel clients to have their estate planning attorney draw the estate plan – so you can see the impacts visually – and keep adjusting it until it fits your family.

4.    Save for college! 👩🏾‍🎓Most families need every penny they can squirrel away for this. But this comes AFTER your retirement savings, not before. Please note, however, that Green Bee Advisory and and LPL Financial do not provide legal advice or services.

Forties:

1.    Keeping working and saving hard. Pay attention to expenses and continue ‘paying yourself first’ via retirement planning contributions.

2.    If you are a business owner, do NOT forget retirement plan 💲contributions. Business owners often believe that their business IS their retirement. But when it comes time to transition or sell, the economic timing is off, or the valuation is not what they expected. That is why you should save for retirement at the same time as running 🏃🏻‍♂️your business. 

3.    Review all your insurance coverages periodically. This includes life and disability insurance, as well as your property and casualty coverage. Many clients do not have a personal umbrella ☔︎ liability coverage when they possibly should. This is intended to protect more assets if you are sued for amounts beyond your standard liability coverage.

Fifties:

1.    In your fifties, take advantage of ‘catch-up’ contributions for retirement plans. In 2024, the max 401k plan contribution is $23,000, but the IRS allows for a $7,500 catch up in the year you turn 50 and beyond.

2.    Stay healthy! Keep exercising and eating well 🥗. Visit your doctor annually for the routine check ups and screens that start to kick in at these ages.

3.    Review and adjust your estate 🏠 plan. If your children are now grown, you may want to update your will, trusts, etc. In fact, your estate plan should be reviewed/updated every 3-5 years or more often if you move to a different state. And if you now have adult children, consider helping them draft some basic estate documents, especially the health care proxy and durable power of attorney👩🏻‍💼.

Sixties:

1.    In your sixties, keep working and maxing out retirement plan contributions.

2.    At age 65, pay attention to the enrollment period for Medicare 🏥. If you miss this, you’ll pay higher premiums for the rest of your life. You can maintain coverage via work if you’re still working but be sure to enroll within 8 months after leaving that job.

3.    Review your gifting 🎁 and philanthropic 💝 goals. At this point, many clients’ children have finished college, so that expense is behind them. If you have charitable inclinations or would like to make monetary gifts to family members, work with your financial planner and accountant to educate yourself to the most 🧮 tax-efficient options.

4.    If you’re not yet retired, begin to think about when you’d like to make that happened, and visualize what retirement looks like for you and your spouse. Many couples 👨🏽‍🤝‍👨🏾 have different ages and visions 🤔 for their ideal retirement – and I recommend discussing your dreams years in advance to be able to plan accordingly, both financially and emotionally. Do you keep the family house 🏡, or move elsewhere? How will you both be spending your days? Will you work part-time, volunteer, care for family members? All of these questions (and more!) are so important to think through ahead of time, so that you can transition together in a compatible fashion.

Seventies, Eighties, and Beyond!

1.    Seventies, eighties and beyond — enjoy these decades! In the financial planning world, we talk about retirement in terms of ‘go-go🏃🏻‍♂️, slow-go👩🏻‍🦽, and no-go years🥱.’ In your early retirement years I hope you’re enjoying life, feeling energetic, and grateful for the time to do what you’d like to do – whether that be adventure vacations or babysitting grandkids.

2.    The eighties tend to be a decade where you still feel good but are perhaps slowing down a tad – maybe enjoying that afternoon nap. (My beloved grandmother-in-law loved her chocolate🍫, books📚, and naps😴, at this age.) This is the time when I see grandparents treating family members to flights✈️, to come see them for the holidays🎄.

3.    The nineties can be more of the no-go years. You stay close to home and enjoy when family members come visit. Hopefully, you have someone close by who can drive or accompany you to your medical checkups.

4.    If you’re still going beyond that – god-bless, and hopefully your family spends as much time with you as possible, soaking up your wisdom, stories, love, and experience! If you’re game, hire an archivist, who can capture your story in photos 🖼 and words – this will be invaluable to your family.

5.    During all of this, be sure you have the appropriate estate documents, and that you’ve shared them with family or trusted advisors. The last thing you want your kids 👨‍👩‍👧‍👧 to have to do is to scramble to manage your estate, or adhere to your wishes. 

Wow. That was a lot to digest. 

Obviously, there are MANY more important financial planning topics that occur at every age, but I wanted to share with a few of those I discuss often with my clients, their children, and their parents. 

I would be honored to discuss them with you. Please contact me at your earliest convenience so I can share with you my philosophy behind educating and partnering with my clients, in order to help them lead happy😁, healthy💪🏽, financially 💸rewarding lives.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.