9  Financial Strategies Not Everyone is Discussing

What’s Your Path to Financial Independence?

21-Year-Olds are rarely thinking about savings and investment programs, and most certainly the majority are not thinking about retirement strategies, however, for me, it became an early passion as I witnessed extreme financial stress resulting in a volatile household growing up. I experienced a monthly outburst from my dad when “the bills were due.” It was a constant fear as an adolescent growing up! 

Perhaps it was these experiences that fascinated me as a young adult learning about finances in my first career as a financial professional. Since the beginning of my career, I developed a strong passion for what to do so I never, ever feel that pain when “the bills are due”.

What should YOU do to make sure you do not experience these same financial pressures and create future financial independence?

First and foremost, it does not need to be that complicated. Here are 9 specific things you can do to make sure your financial house is in order.

1. Be crystal clear of your monthly expenses. Write it down and make sure it is not a mystery.
2. Keep a minimum of 6 months of this monthly number in some kind of cash-equivalent account.
3. If your employer offers a retirement plan (with a match) take advantage of it. However, do NOT use the traditional pre-tax 401(k) if you don’t have to! Roth 401(k)s put you in a much better situation down the road when it is time to use the money.  Having a lot of your income in retirement derived from Roth IRAs could increase your chances of your social security being tax-free which could save you hundreds of thousands of dollars in taxes during retirement.
4. Save a minimum of 10% of your income for the long term (ideally 15%-20%)
5. Use 2-4 % of your income to purchase permanent life insurance of some kind that has a critical illness and long-term care rider. This will provide you living benefits from your life insurance (including potentially tax-free retirement income) in addition to providing for your beneficiaries when you pass away.
6. Create a distribution strategy (think “end in mind”) while you are accumulating your future nest egg. It is important to have a “safe bucket” of money to distribute assets for you to use while in retirement. If you have all your assets in market correlated assets when you are distributing money in retirement you could be “forced” to sell when the markets are down which puts a lot of pressure (sometimes irrecoverable) on your portfolio. This is why many retirees in 2008 had major challenges.
7. Use a financial professional or financial software tools to keep your portfolio diversified all throughout your life. Most people prefer to work with a human being that understands these software tools, however, there may be some people who enjoy the process and really want to “dig in” themselves. It’s important to know your risk tolerance and risk capacity in building out the proper portfolio.
8. Look into certain annuity products as you get closer to retirement.  Make sure the annuity you select includes features that ensure you will not outlive your money. These products can guarantee you income for as long as you live and despite what some of the controversy creators want you to believe they can be a fantastic tool in retirement.
9. Make sure you have the proper healthcare directives, wills, and trusts in place that will avoid conflicts.   This will clarify any serious healthcare decision that needs to be made or if you pass away and want to have your wishes clearly defined and executed.

Consistently reviewing these strategies once or twice per year will provide you clarity and confidence in your current and future financial position and help you live your best life.

Get There!

Erik Sussman( Erik Sussman CFP, CLU, ChFC )

Erik C. Sussman, CLU®, ChFC®, CFP®, and CEO of The Institute of Financial Wellness founded the company to provide financial education, resources, and services that help people live their best lives.

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