Setting your Course for a Secure Retirement 

Key Takeaways:
  • Establish clear retirement objectives and regularly track your progress towards them.
  • In your 40s, focus on maximizing contributions to your 401k and other retirement accounts to build a strong financial foundation.
  • Regularly adjust your financial plan to account for significant life events and ensure alignment with your goals.

 

If you’ve traveled by plane, you know the process involved in getting from the departure gate to the arrival gate. Financial planning is similar, with you as the pilot of your retirement journey. 

There are distinct phases to a flight: takeoff, climb, cruise, descent and landing. In your 20s, you’re taking off with your first job, navigating benefits like a 401k, paying down debt and sticking to a budget. Your 30s are the climb phase, where you’re maxing out your 401k, minimizing debt, funding other accounts and considering dependents. Your 40s, however, are the cruise phase. Financial planning in your 40s is reaching cruising altitude, and as the pilot of your retirement, it’s time to aviate, communicate and navigate. 

Aviate: Maintaining Altitude & Course 

The most important aspect for a pilot at cruising altitude is aviation. This means ensuring your plane is at a safe altitude and on the correct heading. In financial terms, this is the time to start defining your retirement. Although it may be 15, 20 or even 25 years away, building an idea of your destination will provide parameters for your financial journey. 

  • Define Your Retirement: What’s your ideal retirement age? What’s your current lifestyle and will you maintain this in retirement? Having a clear idea of your destination allows you to determine if you have the assets in place to get you there. 
  • Monitor Progress: Constantly monitor your progress towards your retirement goals. Are you saving enough? Can you retire at your desired age? Should you pay down debt or invest more? These questions are akin to a pilot checking instruments and fuel consumption. Ensuring you’re on the right path is important. 

Communicate: Ensuring Clear Channels 

Communication is key to ensuring a safe and efficient flight in aviation. In financial planning, it means ensuring proper channels for transfer and risk management. 

  • Risk Management: Now that you’ve defined your destination and assessed your assets, focus on protecting what you have. Review your insurance coverage: is it enough? What are the biggest risks to your financial plan – death, disability, long-term care? 
  • Communicate Risks: Identify and address risks and deficiencies in your financial plan. Like pilots communicating with air traffic control to ensure a clear path, you must be aware of potential obstacles and use strategies to mitigate, diversify and eliminate risks. 

Navigate: Adjusting Course as Needed 

Even with autopilot on, pilots constantly monitor weather, fuel consumption and other factors that can impact the flight. Similarly, many life events can impact your financial plan. 

  • Life Events: Births, deaths, illnesses and inheritances all play significant roles in your financial journey. Your financial plan should be evaluated often and adjusted promptly to accommodate these changes. 
  • Course Corrections: Consider how life changes impact your plan. Can you afford to pay for college for your children? Do you need to relocate? What are the tax implications of inheriting an IRA? Do you need power of attorney documents even in your 40s? Prompt adjustments ensure you stay on course to your retirement goals. 

As you can see, cruising altitude doesn’t mean hands-off. Your 40s are an important time for making course corrections and adjustments. It’s about ensuring you’re on track with your goals, protected against risks and responsive to life changes. 

Every flight has a captain and a first officer, with one pilot flying and the other monitoring. As the captain of your financial plan, having a first officer, or a financial planner, is invaluable. If you’re not currently working with a financial planner, consider doing so. A financial planner can help you navigate the complexities of financial planning, ensuring you’re on the correct path to a successful and fulfilling retirement. 

Contact an Adams Brown Wealth Advisor to discuss your financial goals.