Smart planning for the future at any age

By M.J. Ellington

Planning for the distant future may seem like a pipe dream, especially if you don’t have a lot of money or are still in the early stages of your working years. 

But smart planning for the future is important at any age or income level, say experts who help clients write wills and other legal documents that spell out what you’d want to happen if you couldn’t speak for yourself.

A Montgomery-based financial planner says common-sense planning starts with a simple notebook where you list places where you have insurance policies, investment accounts, bank accounts and their locations. The location of your will and advance directives need to be listed in the notebook too. The directives are legal documents that state what you want to happen if you can no longer manage your finances or are sick or injured and can’t speak for yourself. 

Experts who advise clients from all income levels and family needs say planning will help you decide which type of will and advance directives are best for you. They give tips on ways to avoid pitfalls in planning. 

When fewer employers offer pensions 

“When you’re young, you probably don’t even think about retirement,” financial planner Lisa Free says. But the certified public accountant from Montgomery says that today, unless you work in a government job with set retirement benefits or a fixed retirement program, you will not have a fixed pension that guarantees a set amount of retirement income. Social Security alone will not be enough to meet your future needs, she says. 

 “You will have to save for yourself,” Free says. “If you start young, a little bit at a time, it will build up.” 

Free says if saving for the future is all in your hands, you can stash funds in an individual retirement account. You should start building savings as well so you have readily available money in emergencies such as loss of a job or large unexpected expenses. 

If you work for an employer with an official retirement program – such as a 401(k), where you make regular investment contributions for your long-term future – Free says to contribute as much as you can to the program.  

If your employer doesn’t have a long-term program, Free says you could set up an IRA that you control to begin long-term saving. You pay taxes on money you take out of the IRA, so you need to make sure you understand how IRAs work.

If you are just beginning a long-term program, Free says you don’t have to go to a broker at first. Instead, “go with a reputable company such as Fidelity, Charles Schwab, Ameriprise and Prudential, to name a few,” she says. “Saving gets easier as life goes along.” 

Three Cs that direct your care and assets

Long-term planning for the future can be divided into three categories: control, cash, and care, Birmingham attorney Lynn Campisi says. The controls are the documents you put in place directing how you want your assets distributed after you die, spell out how you want your financial assets managed, and give direction on how you want your health care and personal needs handled while you are still alive if you cannot do so.

A will provides written direction on how you want your financial resources – cash – and physical assets such as a house or other property to be distributed after you die. Your will names an administrator or executor who carries out the directions written in the will. The administrator pays any last bills you may have and the people you named as beneficiaries in the will. 

In contrast, advance directives give direction on how you want your finances and health care handled if you are still alive but unable to make decisions for yourself. 

A living will or health care power of attorney, as well as a financial power of attorney, give direction while you are still alive to the person or people who will make decisions for you if you cannot do so:

• The financial power of attorney directs who will make decisions about the use of your financial assets. 

• The health care power of attorney directs who will make decisions about your health care if you cannot make those decisions yourself due to injury or illness. 

With these elements in place, most people have the essential components of a smart plan for the future to consider, no matter what your financial situation or age may be.

What do you need to get together before you start putting your plan for the future in place?

• Review life insurance policies and retirement accounts to make sure that all beneficiaries are up to date. 
• Review deeds and title(s) to assets that you own to ensure that things are in order. 
• Know who you want to leave your possessions to at death.
• Know who you want to serve as personal representative under your will. (It is also advisable to name an alternate personal representative). 
• Know who you want to serve as your agent under a Durable Power of Attorney. It is also good to name a successor agent to step in if the agent dies, gets sick, or for any other reason can no longer act (or continue acting) under the POA. 
• Talk with the person (or persons) that you are planning to name as your personal representative (under your will), agent (under your power of attorney), or your proxy (under a medical directive), in advance, to be certain that the person is willing to serve and understands (and will carry out) your expectations. 

Source: LaTanya D. Rhines, staff attorney with the Top of Alabama Regional Council of Governments aging program serving Huntsville and surrounding counties.