Looking Forward.
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"It wasn't raining when Noah built the Ark"
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When you’re young and enjoying life it’s easy not to think about what lays ahead. But in the back of your mind maybe you are wondering if your budget plan will cover all the future events in your life:
School
Work, or your business
Partnership, wedding
Your partner’s School
Housing
Children
Your children’s needs
Your kids' schools
Medical needs
Retirement
Your grandchildren’s needs
But it doesn’t end there:
Post retirement- Assisted Living, Health Insurance, end of life expenses.
Late life expenses can be shockingly higher than you ever thought.
While the majority of people in the US do have health insurance, there are still a large number of workers in the US without it.
A unexpected hospital visit or worse, an accident or surgery can set a person’s financial cushion back considerably.
A move into an assisted living facility can run any where from $100,000 to $200,000 and much higher, per year, per person.
A full time aide costs $300 per day, or around $96,000 per year.
Funeral expenses average $16,000-$20,000
This is not meant to be a scare tactic but to show that you need to be prepared for what life throws at you.
Here are a few thoughts on how to prepare for the future:
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So you’re 50 years old, married with 2 children.
You may have those two kids in higher education and have a handle on your mortgage and tax expense.
If you haven’t thought about the next 30 years here a few ideas:
-The 30 year average return of the US Stock Markets, in aggregate is about 10%, not adjusted for inflation.
Starting now, at age 50, putting aside $10,000 per year, the annually compounded Future Value is about $1,820,000*
*In the world of stock investing, timing is everything. So there is no guarantee that the returns highlighted above will materialize. However, the number quoted above is the 30 year average.
Bond yields
US bond yields march to a different drummer as compared to equities. The return over time depends upon the reinvestment rate of the coupons received and whether the bond is held to maturity. The one thing we can say about bonds is that the coupon yield is a known factor throughout the life of the bond.
-The current yield on a US Government 30 year bond is 3.625% (https://www.treasurydirect.gov/marketable-securities/treasury-bonds/)
Buying $10,000 of a 30 year US Government bond with a current yield* of 3.625% will pay a coupon of $181.25 every 6 months through maturity. Reinvesting those coupon payments will determine your actual total return over the life of the investment. One the other hand, spending that coupon upon receipt will get you $10,000 (Plus $181.25) at maturity. So, reinvest those coupons.
-There are many other investment opportunities but in this situation, but where you will need roughly $600,000, per person, over 3 years of “assisted living”, almost worst case scenario, It seems to make sense to look to the stock market for coverage.
Wzee.net has a free budgeting tool here: but has a much more detailed one, that ties in with all estate financial data already loaded up within the subscription service
The tool has both cash flow investing analysis to help you through your own financial position.
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The writer (Peter Carruthers) has experience in diverse asset classes from Equities, Bonds, Commodities, Asset management and Crypto. Feel free to hit the contact button if you want to discuss other investment vehicles with an eye toward reaching your later retirement goals.
Take a look at the following page and let our partners help you understand these risk events and help you plan for them.
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