Improving your physical health tends to top the New Year's resolution list for people in their 40s and 50s, but the start of a new year is the perfect time to focus on getting your financial health in order. There is also.
As people age, their financial needs often become more sophisticated, and tools that may have served them well in their 20s or 30s (such as robo-advisors or self-directed online brokerage accounts) are no longer the most useful. It may no longer be the case.
Many people seek out advisors as they approach retirement, but it may be advantageous to seek advice early. A financial professional can help ensure financial education, planning, and other areas such as estate planning and taxes are taken care of.
Of course, advisors working with younger clients must wait, sometimes for years, until they accumulate significant assets. But advisors have an advantage by getting in early, especially if inheritance or other funds become available. Three-quarters of Gen Y and Gen Z investors surveyed by Fidelity are likely to continue working with their advisor, and nearly two in three want to consolidate more assets with their advisor. I answered.
Cerulli estimates that at the end of 2022, the average age of wealth management clients working with financial advisors will be 59.4 years old. This is comparable to the average age of the head of a household, as defined by the Federal Reserve Board and the U.S. Census Bureau, of 51.7 years, Cerulli said. According to J.D. Power, data through the first three quarters of 2023 suggests that the average age of investors using a dedicated advisor has fallen slightly to 57.7 years. Fidelity says clients age 50 and older make up about three-quarters of its advisory clients and hold more than 80% of its advisory assets.
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Jason Warner, founder of Warner Financial in Indianapolis, said the key to working with investors who are used to working alone is that even if it takes a few meetings to strengthen the relationship, However, he says the key is to make sure they understand the value of working with an advisor. Not all clients in this age group are a good fit, but those who are a good fit usually stay engaged. “This is a good way to start a working relationship. Take the time up front to understand why the other person is using you,” he says.
Here are seven ways advisors can help investors in their 40s and 50s plan and save for their financial future.
Evaluate where you are. Mr. Werner helps his clients improve their finances, including how they are growing their savings, where they are investing, if applicable, and how to structure their 401(k) allocations in a more ideal way based on their needs. We aim to help you understand the whole situation better.
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“A lot of people don't understand how they're invested in a 401(k),” he says. “There are people who think they're very aggressive and sitting on a bond account. They have no idea. It's not that common, but something like this has happened before. It is.”
Please consider other investment options. Advisors also try to help young clients understand the different options they have when it comes to investing, tax planning, and other financial choices. Many people are aware of their current situation, but are unsure about their future financial possibilities. “A lot of the advice has to do with where they are today and their plans for where they want to be in five, eight, 10 years,” said Judith Lu, CEO of Blue Zone Wealth Advisors in Los Angeles. “I'm doing it,” he says.
Resolving marital conflicts over spending. Lu cited a recent example of an executive couple in their 40s who had been debating buying a Tesla for months. Her husband wanted it and thought he could afford it, but her wife was worried that she wouldn't be able to pay for their child's private school education either. Instead of telling them what-ifs, Lu used real numbers to prove to them that the impact on their finances was not as big as his wife had assumed. They're now proud Tesla owners, and that's no longer a point of contention, Lu said.
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Be prepared for possible negative events. Advisors can also help clients ensure that important action items are not overlooked, leading to unwanted surprises in the future. These essentials include wills and trusts, life insurance, disability insurance, college planning, retirement planning, and more. These things might have been unthinkable 10 years ago.
“Time flies and people put these things off,” says Lee, managing director of KWM Wealth Advisory at Stifel Independent Advisors, based in Pasadena, California. Mr. Wolf says. But, “the cost of not having that plan can usually be very high. And of course, peace of mind planning is also very important.”
Helps resolve competing priorities. Brad Newman, an advisor in the Harrisburg, Pennsylvania, office of Pittsburgh-based Fort Pitt Capital Group, said many in this age group are eager to save enough for their children's education. talk. But they don't always think about the implications for the future. He says it makes sense to talk with these people about whether that's the most appropriate goal for them to focus on, or whether saving for retirement is a more pressing need. “Although there are no scholarships, grants, or loans available for retirement, there are many options for how to finance college.”
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Identify additional storage options. Advisors can help clients in their 40s and 50s find ways to save money that they may not be aware of. “They're starting to save some money, they're starting to feel like it's time for retirement, so now they're starting to It's an ideal time.” Based at First Horizon Advisors.
Bell recommends investors in this age group contribute at least enough money to their 401(k) to take advantage of a full company match. He says people with extra cash flow should fund their 401(k) up to the government's limit. Then, if you still have the funds, you may be able to do a backdoor Roth and convert your traditional IRA to a Roth. If they still have money to set aside, Bell recommends that clients build an “opportunity fund” to take advantage of opportunities that may come their way. This is separate from an emergency fund and can be used to start a business, buy real estate or for other purposes, he said. “A lot of times people have opportunities, but they don’t have the capital to take advantage of them,” he says.
Creates a positive outlook. Considering the financial hardships many families face, it's easy to become discouraged. Wolf's advice to people in their 40s and 50s is to think positively, even if you're just starting to plan and invest. “It’s not too late,” he tells them. “The reality is that you can make a big difference by starting to plan for retirement and start putting aside funds in your 40s and 50s. There's still plenty of time, but don't put it off any longer. Just I think we’re just getting started.”
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