So you are ready to get serious with your financial planning for retirement strategy and you are not sure where to start? You are not alone! As an empty nester, it is easy to look at your future and question if you are prepared.
Financial planning for retirement is one thing that we always avoided. Rather than identifying reasons to engage in the process, our energy was spent on creating excuses about why we didn’t contribute to our future.
- We do not make enough money
- We’re young – there is so much time left!
- I do not want to give up living today
- I am never going to get old – so why save?
Then our son moved out. It was like having to face the mirror of reality all at one time. We were no longer young and we had a ton of debt. We were so busy living for today and embracing our laundry list of excuses that we lost track of time.
For empty nesters, we are running out of time. Now is the time to pull it together and plan for the future. To help us prepare for our future we did a ton of research and hired a financial advisor to help us with our retirement planning decisions.
In this article, I will let you know about our experience thus far in hopes of helping you just as others helped us.
All of a Sudden We Were Old!
When your baby moves out, that is how you feel. You feel old! Rob and I had that realization coupled with the thought that we were strangers. We had based our identity on being a parent and lost sight of who we were as a person; as a couple.
Although it was a rude awakening, it was that wake-up call that was so overdue. It was that moment that we realized that not only had we lost touch with life, but we were also not in touch with our finances.
The problem is when you are not in touch with your finances, the ripple effect is felt throughout your life. The old saying is that “money is the root of all evil” is such an inaccurate statement.
The truth is, money is the vehicle that enables us to take care of ourselves and those we love.
Retirement is the Next Big Phase for Empty Nesters
One of the side-effects of becoming an empty nester is the realization that the next big stage in your life is retirement. When we had that realization it came with the same realization that we were living paycheck to paycheck and we were sporting a whopping $50,000 worth of non-mortgage debt.
Like many Americans, we were facing our reality that our lack of planning was catching up to us. We needed to make a change and we needed to do it fast!
When it came to our finances, we were on autopilot. We spent so much time working to grow our careers, that we did not engage in living. We automatically invested every pay period into some unknown funds in our 401k accounts, our bills were on auto pay, and money was being deposited into savings.
The problem? Money was being pulled from savings just as quickly as we deposited it. The shock and realization that we did not know how we were funding our lives let alone our future terrified us.
It is Time to Make a Change
If you can relate to our story, I am sorry. I know how scary it can be. It is that fear that drove us and it can drive you too.
Now is your time! You have taken care of everyone else for so long, now is the time to make a change and think about where you are and where you want to be. Start dreaming of where you want to be and then start making the changes necessary to correct your course.
Financial Planning for the Empty Nester
Financial planning for the empty nester includes the same steps as everyone else, it is just a different mindset that you are working from.
When we’re in our middle years, we may be sending kids to college. When we’re close to retirement, perhaps the nest is empty and we can finally take the time to travel and pursue some long-postponed dreams.
Essentially the whole world wants us to spend, and easy credit is dangled before our eyes everywhere we look.
It’s never easy. But the “right thing” is to follow the old rule to “pay yourself first.” In this case, “yourself” means your future self who is going to want or need to retire.
To make sure that we are in the best position to retire, we are working our 7 step program by getting our debt paid off, building up savings, and beefing up our retirement.
I swear if I could only go back and kick my twenty-year-old butt, I would.
Debt Pay Off Fast!
Paying off our debt as quickly as possible was our number one priority when we realized that we were broke! We reluctantly drank the Kool-Aid and read Dave Ramsey’s Total Money Makeover book and started working on our relationship with each other and with our money.
The thing we realized about debt is, our debt was our past. For us to think of our future and start planning for retirement, we needed to settle up.
When you are burdened with your past, being able to see the future is a struggle. The thing you have got to realize is that if you can raise kids, you can do anything!
Before you get too stressed out with retirement financial planning, take a moment to get your house in order.
Here are a few tips and tricks to get you started:
- How to Pay Off Debt Without Any Money | Paycheck to Paycheck
- Money Problems: Fix Them Today & Enjoy Life | Retail Therapy?
- 43 Free Budget Printables | Get Organized & Pay Off Debt in 2019
Hiring a Certified Financial Advisor
If the idea of hiring a financial advisor intimidates you, know that you are not alone. For us, hiring an advisor was not on our radar, that is until we engage in managing our money.
It is amazing the transformations that take place in your life, in your way of thinking when you start taking care of your past and dreaming of your future.
When you are actively living and allow yourself to start dreaming, possibilities seem to just present themselves. It was about three months into our debt payoff. We were feeling pretty good because we were seeing the results of all of our hard work.
The idea came about that perhaps we could retire early! Yeah, two individuals who were reckless with their money retire before retirement age!
It was that dream that helped spur us forward. Once we paid off our debt, we built up a 3-month emergency fund and then hired a financial advisor.
When is it time to hire a financial advisor to help with your retirement planning?
This is your decision, but it is one that will give you peace of mind, help you to stay on track, and help you to create financial goals that will provide you with the freedom you crave.
For Rob and I, we knew that once we settled our debt, we needed a tool to help keep the momentum going. From our past experiences, we were so afraid of fizzling out once our debt was paid off that we needed to have a plan in place.
Our plan: Hire a financial advisor and create a blog to hold us accountable.
What does a financial advisor do?
Understanding what a financial advisor does is a bit tricky as their job is to customize their services to meet your needs. Before even meeting with a financial advisor, I highly recommend imagining where you want to be and when you want to be there.
It is up to you to tell the financial planner where you want to be. It is their job to provide you with guidance that will help you to reach those goals.
Before you hire a financial planner, be sure that you are comfortable with their ability to answer your questions. The role of the financial planner is to educate you on the options available and not make all the decision for you.
For us, we asked a few trusted friends who they work with to manage their finance. When you meet with an advisor for the first time, it is kinda like dating. You must know that you are compatible. If you feel pressured in the slightest, this is your cue to leave. Your first meeting should just be a compatibility check and you need some time to think it over.
You do not have to hire the first person you speak with.
Here are a few questions we asked our financial advisor before hiring them:
- Why are you a financial planner?
- How long have you been with your current company?
- Where did you work before?
- What is your area of expertise?
- Do you plan on leaving? If so, when?
- How long have you been practicing?
- Are you committed to upholding a fiduciary standard?
- How do you get paid?
- What is your investment strategy with your own money?
- If hired, how frequently do you like to see your clients?
- Are we a good fit for your typical clients?
Do I need a financial advisor?
If you struggle with staying actively engaged with your finances, if you do not have the expertise to keep up with the changing markets, or if you want to retire respectfully, you just might want to look into hiring an advisor to keep you on track.
If that is not enough to convince you, take a moment to remember the recession that destroyed so many dreams not that long ago.
The morbid joke about the Great Recession was that it turned Americans’ 401(k)s into 201(k)s. Indeed, the nation’s 401(k)s and IRAs lost about $2.4 trillion in the final two quarters of 2008, and the average loss that year for workers who had been on the job for 20 years was, according to one estimate, about 25 percent. – The Alantic
For us, we found out that the key element that got us into financial trouble was our emotions. It is those emotions that a financial planner must be able to help you manage.
Retirement Guidance and a Financial Planner
Unless you are a stock market guru, the likelihood that you need some retirement guidance is an absolute. Many companies these days offer retirement benefits through 401k or 403b plans. If you are lucky, a certain portion of what you contribute to these plans trigger your company to provide a match of some sort.
The problem is, we either use whatever the company defaults the contributions to go to or you go in and make decisions on your money that may not be in our best interest.
Every paycheck we mindlessly contribute a portion of our paycheck for investing which is good for consistency. The problem is, we are not always engaged in the process, we have emotions that cloud our judgment, and we do not monitor the markets for a living.
That is where a financial advisor should be able to guide you. It is their job to educate you on your options and continue to monitor the status of your retirement account to make sure that you are on track. You really do not want to wake up one day and find your 401k is now a 201k.
Rebalancing Your Retirement to Control Your Exposure to Risk
One of the biggest roles that we needed from our advisor was to help us with managing our 401k plans. Once we decided who we were going to hire, they asked for a large laundry list of information so they could help us navigate today and plan for tomorrow.
On our first meeting, our advisor made some future allocation recommendations to Rob. With Rob’s retirement, we took a hands-off approach. In the 26 years, Rob has worked for this company, we never made any adjustment to his plan.
My account, on the other hand, I really made some modifications to the investments. I utilized the idea that I should only purchase the top performing equity options – I had all of my retirement in the stock market. The look on our advisor’s face was priceless and she tried to tactfully tell me I really needed to diversify my retirement.
Although my account has done extremely well, the time has come that I cannot be as aggressive as I once was. After the volatility in the market of late and the chatter of a pending recession, I was very grateful for advice on how to reduce my exposure to risk.
Estimating Your Retirement Contribution Amounts to Meet Your Retirement Age Goal
Another benefit of using a financial advisor is that they help you meet your financial objective in retirement by planning today. Navigating through all of the government rules and changing economic climates is complex. That is where their expertise should help to guide you on how much you need to have withheld today to meet your goals of tomorrow.
A financial planning main objective should be to help you get to your main objective. Retire comfortably?
Cash Savings Recommendations
The rule of thumb for what you should have on hand for an emergency fund is anything but a rule of thumb. You hear anywhere from three months to twelve months generally.
When it comes to how much cash you should have on hand for emergencies, is very personal. We all have a different risk tolerance and comfort levels. Your financial advisor should be able to help you to come up with the dollar amount that meets your objectives.
When planning for your retirement, know that you do not need to do it alone. There are individuals out there that are committed to helping you stay on track with your finances. For us, a financial advisor is just as important to have as a doctor, a mechanic, or an attorney.
Choosing to hire a professional is extremely personal as they will require access to your financial past and present so they can help you with your future. Be sure when you are interviewing for this position, you and the advisor can easily communicate and you are receptive to their positions and ideas.
What do you look for in a financial advisor? Does retirement planning worry you? Comment below and be part of the story!