- Certain life events can have a major impact on a client’s financial future.
- Clients in their 40s and 50s can be torn between saving for retirement and contributing to their kids’ college funds.
- Now is the time to get focused on saving for retirement while clients are in their peak earning years.
Life is full of important events. And each one brings with it a series of financial decisions that can affect your clients’ finances for years — or even decades — to come.
For clients in their 40s and 50s, they’ve finally reached their peak earning years. They still have time to grow their nest egg, but they may be torn between saving for retirement and contributing to their kids’ college funds. They’ll be looking to you for guidance to help make sense of it all.
Here are some key life events where they could use your help in making major financial decisions:
Saving for retirement
Hopefully, by their 40s, your clients have already been saving in their employer’s retirement plan. If they haven’t, it’s time to put their retirement savings in overdrive. Talk to them about:
· Boosting their retirement contributions to their employer’s 401(k) or 403(b) plan
· Possibly setting up a traditional IRA or a Roth to help maximize their savings and enjoy the potential tax advantages
· Consolidating or rolling over any funds from an old 401(k) or 403(b) into a rollover account
· Making catch-up contributions to their retirement plan or IRA if they’re over 50
Saving for college
If your clients have kids, they’re probably wondering whether they should fund college or their own retirement plan first. Counsel them on the reasons to fund retirement first, reminding them there are multiple ways to help pay for college when the time comes. Coach them on:
· How much they need to be saving for college
· Opening up a 529 plan to take advantage of potential tax savings
· How to balance saving for retirement versus saving for college
Sadly, some of your long-time clients may be facing the additional financial challenge of getting divorced. Splitting up a household is never easy — even in an amicable situation. This will likely be an emotional time for them. Take the time to discuss:
· Securing legal counsel if they haven’t already talked to a lawyer
· Gathering information on all financial accounts and insurance
· Changing their marital status with the IRS and their employer
· Opening a separate bank account and credit card in their own name to help establish credit
· Revising beneficiaries on insurance, retirement accounts, wills, etc.
· Short-term and long-term expenses moving forward
· Making sure what your client is left with is fair for everyone affected
Career change or starting their own gig
Midlife often sees clients switching careers or starting their own business. But before they make the leap, talk with them to be sure they have a plan and a savings cushion. Discuss their vesting status at their current job so they don’t leave any money on the table, as well as how they will continue to save for retirement. Also, remind them about the expense of health insurance, especially if they’re going out on their own.
Getting out of debt
Clients with substantial debt who are looking to retire early should consider using their 40s and 50s to reduce or eliminate the burden weighing them down. Meet with them and talk over paying off any high-interest consumer debt, such as credit card balances, a top priority. If they still have any outstanding college loans, look at how they can get those paid off — even if that means putting less toward retirement in the short term.
It’s never a happy topic, but clients should be thinking about estate planning in their 40s and 50s. Remind them that it’s not just for the wealthy, and they probably have more than they think that needs to be accounted for (house, cars, savings, kids, etc.). Plus, it makes it easier on surviving relatives since they won’t have to guess or argue about your clients’ final wishes.
The life insurance discussion
Life is constantly changing. If it’s been awhile since you had the life insurance discussion with your clients, it might be time to revisit the topic. Ask them if their family has grown or if they’ve accumulated additional assets since they first purchased their policy(ies). Make sure beneficiaries still reflect their wishes, and consider whether now might be the time to convert some of their term life insurance to permanent before it gets more expensive with age.
Protecting their nest egg
Remind clients that their most valuable asset is actually their ability to work and earn a living. Coverage for disability might be something to consider if they don’t already have a policy through their employer. There’s also coverage for long term care to start thinking about. Someone turning 65 today has almost a 70% chance they will need some kind of long term care during their life.1 If clients wait until they’re in their 60s or 70s to prepare for long term care costs, they’ll likely wish they’d done it sooner.
Clients in their 40s and 50s are in their prime earning years, but their window of opportunity to grow their retirement nest egg is getting smaller. There’s still time to create the retirement they envision, but they need your expertise to help keep them focused and make smarter choices than they probably made in their younger years.
Things to Consider:
- If you hear about a client going through any of these key life events, it might be a good excuse to check in with them and see if their needs have changed.
- Clients in their midlife years need your financial guidance more than ever because their window of opportunity to save for retirement is getting smaller.
- These clients are in their peak earning years and may have the resources to purchase financial solutions to help protect their way of life.
1 “How Much Care Will You Need?,” LongTermCare.gov, accessed May 2019
Neither Transamerica nor its agents or representatives may provide medical, tax, investment, or legal advice. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors and financial professional regarding their particular situation and the concepts presented herein.