retirement planning options such as a SEP-IRA or Individual 401(k).
Establish and maintain an emergency reserve/opportunity fund. While those who work for a company should strive to have three to six months of living expenses set aside, the self-employed should shoot for as much as a 12-month cushion.
Protect your assets. Without proper protection, you can forget about achieving your retirement dreams. Life insurance is necessary for a growing family. Increase yours as needed to meet liquidity needs in the event of a premature death. The Whites may want to consider converting a portion of their term insurance to a permanent cash value policy for long-term estate planning purposes, says Wright. Maintaining adequate disability income insurance is important as well. Particular attention should be paid to the elimination period, benefit period, and the policy’s definition of disability. You must also maintain the appropriate amount and type of liability insurance. This is especially important for business owners and individuals with rental property. “Consult with an attorney to make sure that any existing and future investment property is structured properly to minimize taxes and/or liability exposure. For example, if something were to happen to Dennis, would Century 21 buy back his franchise? And if so, how would the franchise be valued?” says Wright.
Learn from your par
ents. Many in this age group have parents who are retiring. They are seeing how prepared or unprepared they are for it. It’s a wake-up call. Many realize that their parents will need their financial support or that their parents may have to go back to work. The best case scenario is that your parents have prepared well for retirement. Unfortunately, that’s not always true. Start preparing yourself now.
Be savvy about your next moves. You may have already experienced a layoff or changed careers. When you’re in transition, staying on track is key, says Wright. “Roll over retirement funds and consolidate various accounts so you will have greater control over your money. You can’t expect your old employer to look out for you, updating you on changes in the retirement plan,” Wright points out. And don’t dismiss vesting schedules. If waiting six months to leave a job will mean being 100% vested, consider staying and walk away with more money. Don’t let entrepreneurial aspirations get in the way of common sense.
Have a family spending plan. Be careful of overspending, especially on the children. And don’t put saving for your child’s college education before saving for your own retirement. “Just like when you’re on an airplane and they tell you to put on your oxygen mask first and then help your child, it’s the same with retirement,” says Wright. “You want to provide for them, but not to the detriment of your own retirement. You can get a loan for a child’s education, but you can’t get a loan for your retirement.” With private school education costs in the stratosphere, many parents will have tough choices to make. Do you fund expensive schooling now or put that money toward