Throughout your working life, your financial needs will change and evolve. A clear understanding of the life-cycle of your financial needs will help you prioritise your goals and objectives and ensure you are steering your finances in the right direction. At Milestone Advisory, this is how we see your financial life-cycle.
Early years (early 20’s up to 35)
During this period, it is likely that you will be building your career. Typically, it is also the period that you will be saving and budgeting to buy your first home and start a family. The greatest financial risk you will have is how will you cope financially if something happens to you to prevent you from working during that time? After all, it’s your income that will enable you to buy your house, educate your children and even plan for your retirement in the years ahead! So other than your mortgage, protection policies such as Income Protection and Life Assurance may be the most important things to consider. You will also need to start saving for retirement. While retirement seems far into the distance at this point in your life, the more you save during the early years, the less pressure there will be to save and chase high investment returns in your later working years.
Growth Years (35 – 50)
While your career may have now be firmly on track, family protection and retirement planning are still key financial requirements. Savings plans and investment policies will also be a serious consideration. A recent article by Charlie Weston in the Irish Independent had the headline “Parents support students with €428 a month as cost of going to college soars”. With costs like these, the earlier you start growing this college fund, the better!
Consolidation Years (50 – 65)
Retirement planning optimisation should begin to take centre stage at this point. You should establish how much income you are likely to require in retirement. Start with the State Pension, then add any other pension plans you may have through an employer or personally. Having determined the amount of annual or monthly retirement income your assets should provide, compare that with your retirement income goals.
If your current projected retirement income is insufficient for your needs, greater saving is required to meet your goals. This can be done through Additional Voluntary Contributions (AVC’s). Prior to retirement, you should also start to consider which retirement option is most appropriate for you. Are you considering an annuity? This is a pension which will provide a guaranteed income for life and for the life of your spouse if you so choose. The alternative option is an Approved Retirement Fund (ARF). The ARF is a post retirement investment, which allows you to keep your retirement fund invested throughout your retirement while drawing a regular income. It can be passed down to your children on death, unlike the pension. It is important to consider this before retirement as it may determine how your retirement fund is invested in the run up to retirement. Is there a lifestyle investment strategy available? And if so, does it suit your preferred post retirement choice?
Retirement & Drawdown years (65 and onwards)
As your working years come to an end, your priorities will shift from saving to living off your savings. Protection, both life and income protection are no longer primary needs, other than life insurance for estate planning or long-term care costs. Your initial consideration at retirement will be Tax Free Lump sum maximisation. Next, are you choosing a guaranteed pension that suits you? If you decide to invest in an Approved Retirement Fund (ARF), you will need to carefully consider an investment strategy as it is important that your fund can sustain an income throughout your retirement. After you retire, if you decide on the ARF route, the focus of financial planning will centre on maintaining your retirement income stream. This requires you to manage and monitor the investment performance of your assets to ensure that your income is maintained in retirement.
In an ideal world, everyone would have ticked all the relevant financial boxes at each stage of their life-cycle. However, at Milestone Advisory, we recognise that this is not always the case! The good news is that it’s never too late to take control and Milestone Advisory look forward to helping you do just that!
Here to help you navigate your way to financial security.
The Milestone Advisory team are qualified financial services consultants. We specialise in helping professionals in the construction sector and related industries. Our team will work with you to review your finances, explaining your options in clear English.
No jargon – just the facts.
For further information please contact Susan O’Mara via email or phone: (01) 406 8020. Milestone Advisory DAC t/a Milestone Advisory is regulated by the Central Bank of Ireland.