Long-Term Care (LTC) Options as You Age

Recently, I followed up with a client after the client had been away on a family vacation for two weeks. Prior to that trip, the chaos of summer, work travel, and meetings had prevented the client from following up with me on a minor but impactful recommendation I had encouraged the client to consider in our last conversation. Before I had the opportunity to even say, “Hello,” the client apologized and communicated that I was owed a phone call. Yes, I had encouraged a decision knowing the impact would further strengthen the client’s financial situation, but in my diligence, I didn’t expect a phone call. The definition of diligence: careful and persistent work or effort. I love the simplicity of this definition and the use of the words persistent and effort. From knowing the client, I know the client is incredibly diligent in her own work and personal life. You see, when my client picked up this phone call, and the diligence of my follow up had just replaced the client’s call, eased the burden of the client having to call me back (amidst her intense work schedule), and ultimately resulted in the client making a best decision to improve the efficiency and effectiveness of her plan after re-clarifying the client’s priorities and current time frames.

An ongoing and sound financial plan requires an immense amount of diligence. If you are not ready to double down on this level of diligence on your own, why not hire a Decision Coach and Certified Financial PlannerTM professional to sprinkle the entirety of your plan with some diligence? Have you rebalanced your 401(k) lately? Have you increased your contribution percentage after your last raise? Did you update your life insurance planning after you moved into a new home after your second child was born? Are you planning on saving for that dream trip to Europe, or is that just going to magically happen in the next five years? What are the trading fees on your brokerage account? You have given thought to each of these questions. You have even discussed the answers with your spouse or close friends. Yet, you are busy and these action items are on the top of your priority list on a Tuesday. All of these questions require thoughtful planning with ongoing diligence, communication, and action. As soon as you settle into a plan with the right cash flow, life happens and you will need to adjust the game plan. My client didn’t forget to call me back. My client wanted me to call me back. Yet, my client didn’t call me back and didn’t make up her mind, until I called. Was I upset that I had to follow up several times? Was I frustrated my client seemed non-responsive? Of course not! It’s my career and joy as a Decision Coach. It’s part of my role as your financial planner to be diligent, to hold you accountable, to help you make qualitatively better decisions over time. Do I expect this to take a few follow up calls and three incredibly productive and ongoing quarterly progress checks between annual reviews? Of course! I love crafting a game plan for you. I love when you approach a financial decision and prior to making a decision, you reach out to me. I want your plan to be dialed in, so ultimately, you are living the life you want now, saving for the life you want in the future, as I provide the guard rails of diligence all along the way. A lot happens in a year and all of those little decisions have a significant impact over a long arch of time. Why I am so diligent with your financial plan? So, you don’t always have to be…don’t apologize, let’s just make the next best decision together and I’ll handle the follow up so we can one day celebrate together, not just because you are retiring, but because of the life you lived to get there.

Regardless of where it comes from, getting an unexpected chunk of change usually makes for a pretty good day, week, or even year. But if you aren’t intentional about what you do with your extra cash, you could follow in the footsteps of many lottery winners who squander their winnings and end up unhappy and broke.1  Even if the gift you receive isn’t a significant amount, you’d be amazed at how some smart planning can make a big difference down the road. Let’s look at some ways you can you use your raise, refund, or windfall to get ahead financially.

1. Pay Off Debt

Big debt, small debt, it doesn’t matter. Debt is debt. Start with high-interest debt and work your way down. Did you know that the average American household carries over $16,000 in credit card debt and pays an average of $1,292 in interest annually?2  Sure, using your extra influx of money to reduce debt isn’t as fun as going on a trip, but think of the satisfaction you’ll feel when you see your balance decrease, knowing that you are saving yourself thousands of dollars in interest in the long run.

2. Beefing Up Your Retirement Savings

Even if you diligently contribute to a 401(k) or IRA, chances are you aren’t maxing out those accounts. Let’s say you receive a $3,120 tax refund, the average amount according to the IRS.3  You then deposit that $3,120 in an IRA and see a 7% rate of return annually. In 20 years, you will have earned approximately $8,000 on that investment due to compound interest. Let’s go a bit further. If you invest your tax refund every year for 20 years, your retirement savings could see a boost of almost $150,000! If you’ve received a raise, use some of it to increase your contribution percentage right away. That way, you won’t get used to living with that extra money and it puts you ahead for the future.

3. Invest In Education

Most of us dream of our kids going to a great school and getting a solid foundation for their future career, but have you considered how much of an investment it will take to get them to that point? The numbers can be daunting. These days, a high school graduate can expect to pay upwards of $200,000 for an undergraduate degree at a top school4 and over $10,000 each year for in-state tuition alone at a public institution.5  The costs will vary depending on room and board and other educational costs, but either way, it’s a lot of money.

One option is to open a 529 account with your tax refund and, once again, let compound interest help you get ahead. Not only will your investment pave the way for your child’s future, but it could also give you a tax break.

4. Build Your Emergency Fund

An emergency fund provides you with a cushion for those times when life gives you lemons. If you don’t have readily available savings, something as simple as an unexpected car repair or medical bill could derail your finances. Or, if you know you have a large purchase or a life milestone approaching, such as welcoming a baby into your family, having an emergency fund will help you avoid digging into long-term savings or going into debt to cover costs. You can’t put a price on the peace of mind that an emergency fund will give you, so think about investing some of your tax refund to boost your short-term savings.

5. Be Generous

Giving your tax refund away may not help you get ahead, but it could make a lasting impact on someone else’s life. Find a charity or cause that is close to your heart and pay it forward. Your gift could also help you when the next tax season rolls around. Just make sure to get a receipt for your contribution and itemize your deductions.

Have You Received Some Extra Cash?

It’s okay to treat yourself when you find yourself with excess income, but don’t splurge just because the money is there. Make a list of your financial priorities and then map out how your additional money could give your financial future a boost. If you would like guidance on how to use your raise, refund, or windfall, call my office at (949) 221-8105 x 2128 or email me at michael.loo@lpl.com.