One of the central tenets to retirement planning is saving money for the future. And yes, stashing funds in a 401(k) or IRA can not only help you prepare for retirement; they can, depending upon the structure of the account, potentially save you money on your taxes each year.
But there are also things you should consider spending money on now, while they’re much more affordable, even though you likely won’t need them until later.
Life Insurance. Most of us need at least a basic life insurance policy at any stage in life. This need grows in importance when you get married, have children, or take on debts that would need to be covered in the event of your death. The younger you are when you purchase a policy, the more likely you are to obtain the best rates possible for your situation. Just remember to review your needs every few years, and update your life insurance as those needs change.
Long-term care insurance. Yes, it’s unlikely that you will need long-term nursing care before your retirement years. But if you wait until your sixties or beyond to enroll in a policy, rates will be much higher. Since about 70 percent of today’s 65-year-olds will need some form of long-term nursing care in the future, this is a significant financial risk for the majority of retirees.
A health savings account. Technically, you might need your health savings account at some point before retirement. But it’s worth mentioning this fact: All unused funds in the account are rolled over from one year to the next, all the way into retirement. At that point you can still access your HSA to cover medical expenses like Medicare premiums, medications, certain equipment, co-pays, and more. If you’re eligible for a health savings account, it makes sense to take advantage of the tax benefits (they’re similar to a retirement account) and stash extra money that you will probably need in retirement anyway.
Of course, all of these considerations come second to your primary retirement savings plan. Give us a call to discuss your retirement strategy, and we can help you decide if it’s time to add these items to your retirement preparedness checklist.