For those who have a dedicated retirement savings plan, this may seem like a fund-it-and-forget-it type of situation. However, family life changes can greatly affect your financial planning. A wedding, baby, divorce, loss of a partner—all are significant and emotional life events, and all can have a potential impact on how you save.
Whatever changes come your way, it’s important to keep your future a priority. Below are some tips to help keep your retirement savings from being derailed.
While it may be more exciting to plan the wedding, it is critical for you and your partner to discuss your finances together. Money can be a source of contention even for the happiest couples. Avoid potential conflicts with these tips.
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▪ Create a budget: Spend some quality time on a budget for your combined incomes and expenses. Retirement saving should be a priority, because it will impact your future together.
▪ Save more: If both spouses are near the start of their careers, you have more time and opportunity to save. If you’re further along, you may want to consider finding ways to save more.
▪ Think ahead: Regardless of how long your honeymoon phase lasts, be sure to review your finances often and make changes when necessary
Having a baby
From daycare to college, raising a child can be both rewarding and, well frankly, expensive. With your family’s new immediate needs, you may be tempted to pull back on saving. Don’t. Retirement will be here before you know it. In the meantime, keep these items in mind.
▪ Remember your future: Your future security will actually benefit your children. By saving enough for your retirement now, you won’t have to depend on them later. And, if you continue to save, you have more potential opportunities to grow your money.
▪ Save for emergencies: Kids come with all kinds of unexpected expenses. Build an emergency fund to cover them. Save enough to cover at least six to 12 months of expenses.
▪ Get creative for college: There’s more than one way to pay for college--financial aid, grants and scholarships are all potential options. There aren’t as many choices for saving for retirement. Saving now is one of your few best bets for success.
Divorcing or losing a spouse can take a big toll, both emotionally and financially. Even if one partner managed the daily finances, it's important to understand your assets and debts. Be sure you also understand how your retirement accounts are impacted, too.
▪ Create an action plan: Even if the emotions haven’t settled, it’s important to plan for your new financial situation. That includes creating a new budget and considering how your retirement needs will change. In divorce, some of your savings may go to your ex-spouse. As a widow or widower, you may need to manage benefit payments.
▪ Stay focused: Your income may have changed, but your long-term goals should stay intact. It could mean finding ways to set aside more for retirement. Be careful to follow your budget. The temptation to use credit cards can be greater when your income is reduced. Accumulating debt now could have a worse long-term financial effect.
▪ Deal with the details: You will have a lot of details to manage when a family change occurs. It’s a good time to review the beneficiaries you have named for your retirement and other financial accounts. Try to take care of the details soon so these details don’t fall off your radar. This will ensure your wishes will be followed when the time comes.
The bottom line is that your family life may change, but one thing needs to stay the same. Stay committed to your retirement savings. Your future is counting on it.
Diane Gallagher is Vice President of DCIO Practice Management for American Century Investments. She can be reached at Diane_Gallagher@americancentury.com or 816.340.3063.