Smart Retirement Planning For Every Age

Solid planning and the right safety net will ensure that you enjoy your golden years

coverage. Currently, David has $450,000 worth of coverage
and Gay has $200,000. Dunagan says they each should have $800,000. A 20-year term policy will be cheap and meet their needs. Higher insurance levels may be needed to take care of the mortgage, the children’s college education, and other living expenses.

Open additional tax-sheltered investments. Saving outside your employer-sponsored retirement plan is always smart. Dunagan says the Highs should put $500 per month into a tax-sheltered retirement vehicle. He recommends an index fund inside a variable annuity because it would be tax deferred for the next 20 years and by then they would be in a lower tax bracket.

Keep spending under control. As you become a higher wage earner, you become more vulnerable to layoffs. You also have to guard against illness more often as you get older. “You don’t want to overextend yourself, assuming you will always be able to keep up your current lifestyle,” says Dunagan. “You need to leave yourself breathing room, so if you or your spouse lose a job or get sick, you will better be able to handle the change.”

Don’t refinance unless necessary. A lot of professionals run up $30,000 to $40,000 in credit card debt then refinance their mortgage to pay it off because the real estate market has been strong. However, they run the risk of running up their credit cards again. “They don’t get that they are living above their means,” says Dunagan. “You have to be careful of re-stripping the equity out of your house. At some point you stop refinancing and pay off the mortgage.”

Prepare for the possibility of divorce. “Divorce can be financially devastating,” says Dunagan. “Design a plan to regroup, to get back on track, and be prepared to make adjustments, whether it’s moving to a smaller place or whatever you need to do. Don’t get depressed, take action.”

The Highs want a larger home, and now they have the ability to save for one. Dunagan says they shouldn’t pay more than $1,000 more a month for their new mortgage than they currently pay, to make sure they don’t overextend themselves. “They should be able to get a better rate with an FHA loan,” he says. “After 12 months of good credit behavior, [the Highs] should be able to get a good rate.”

Overall, the best days are ahead for the Highs. “They have taken responsibility for what’s happened and have bailed themselves out,” says Dunagan. “They are making better decisions and wise choices. They are definitely on the right track.”

The Advice For Your 40s
While typically you might expect an allocation of 65% stocks and 35% fixed income for the forty something crowd, if you are on track with your retirement goals and also have savings in cash, Dunagan likes to be a little more aggressive. “You want to take your foot off the accelerator a little bit, but you still need growth,” he says.

Of course, since everyone will have different life situations by the time they reach their 40s, there

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