What would happen going forward if you lost your ability to work for the remainder of your life?
Would you have the financial means with which to survive? Have you spent years building up your “rainy day” fund? What “fallback” solution do you have in place to get through tough financial times?
These are all questions that you should be able to answer, yet many people simply have no answers for such important matters in their lives. As a result, major financial dilemmas can creep up on them in a hurry, leaving some with nowhere to turn.
Put the Funds in Motion
For starters, take the time now (not when you are in a pinch) to see where you stand financially.
Look at the following if you reside in North America to see what is most applicable to your financial needs:
- Resources – What are your current and projected financial resources whether you live in the States or Canada? Will you be getting an inheritance of any sort down the road? Are you in a relationship where you are both working full-time or is it just your income that you two essentially rely on? About how many more years can you and/or your spouse expect to work? Have you taken advantage of a company-sponsored retirement plan? These are all topics that you should have an answer for in order to better secure your current and financial future;
- IRA – Have you been setting aside money in a regular or Roth IRA? The two best-known of the IRAs available, the former is tax-deferred as you put money in it, with taxes being taken out when you start minimal withdrawal of money (you must begin taking funds out at age 70 ½). Meantime, there is no age when you must start taking money out of a Roth IRA; however that IRA is grown with after-tax dollars, so you do not get taxed when you begin pulling funds from it. Once you’ve reached the age of 59 ½, you are allowed to take out funds from the Roth IRA minus any penalties. Just like purchasing life insurance, having a retirement vehicle or two in place for not only your well-being but that of your family makes sense;
- 401K’s – With a 401K, you can build up your investments through your employer. Unfortunately, too many employees miss out on the opportunity to participate in such workplace plans, plans that are even better when the employer matches a portion of the money the employee is investing (essentially this is free cash from your place of employment). If you are over the age of 50, you can put additional money in as you are essentially “catching up” in the race to fund your retirement. Another item to keep in mind is that you don’t necessarily have to be a full-time worker to become involved in a company 401K, so check with your company if they offer such opportunities in the event you work there part-time;
- RESP’s – With a registered education savings plan (for Canadian residents) you can put away funds for a child’s education when they reach the post-secondary level. The money earned over time grows at a tax-deferred rate. It is important to keep in mind that the plan ends no later than when the individual it was taken out for turns 35.
Many Factors at Play
As you might imagine, there are many factors at play when it comes to determining your best financial scenarios.
The most important factor to remember is not making any rash decisions when it comes to your financial well-being.
Undoubtedly, changes will occur in both your professional and personal lives over time, so be able to adjust and plan accordingly.
That said starting sooner rather than later to plan for retirement no matter where you reside is a smart thing.
When you have a plan in place to manage your financial future (and take action if things go bad) is of the utmost importance.
Lastly, talk with family, friends and co-workers as to the choices they’ve made or will be making in their financial plans.