Those who do not have children tend to have more financial flexibility to pursue their goals throughout life and retirement. This makes sense when you consider that the cost of raising a child from birth to adulthood is currently estimated at $233,610 (before you factor in college). However, childless singles and couples still need to manage their future financial needs.
Many mistakenly assume the absence of heirs removes the weight of retirement and legacy planning from their shoulders. Don’t fall victim to this myth. Financial planning is just as important for childless adults as it is for anyone else. I encourage my clients who don’t have children to take the following actions:
■ Prioritize saving for retirement. Instead of saving for childcare, sports leagues or a college fund, consider doubling-down on retirement savings. You may spend decades in retirement pursuing your hobbies and goals. Calculate what it will take for you to live the lifestyle you want and compare it to your current savings. Create a plan to save the difference. Consider contributing as much as you can to your workplace savings plan, if you have one, and consider building up Roth IRA savings to help create a source of retirement income that is potentially tax-free.
■ Investigate long-term care insurance. One of the biggest concerns clients without kids express is who will take care of them later in life. There’s no guarantee that parents can depend on their kids to support them, but for non-parents there is no backup plan — they’ll have to save for long-term care. So, make it a priority to decide how you will manage healthcare costs in retirement. Medical expenses continue to rise, so it’s important to have adequate savings and insurance coverage. Explore your options through Medicare and your current or former employer to see if long-term care insurance would benefit you. Additionally, consider researching caregiving options and long-term care facilities in your area so you are familiar with the choices if you need them further on down the road.
■ Put financial decision-makers in place. Who’s going to make financial decisions for you in the case you become incapacitated? It’s important to draw up documents to name a durable power of attorney to look out for your financial interests if you are unable to, including legal and tax concerns. Your agent should be someone you trust, whether that’s a spouse, friend, extended family member or professional. Keep in mind that you don’t have to share your full financial situation and account numbers now. A common approach is to share enough information so your contact person can step in should a situation arise where you need help making financial decisions.
Plan your legacy. With no direct heirs in line to inherit your estate, you will want to consider what you’d like your legacy to be — including how your assets should be distributed upon your death. You may have other family members, friends or favorite charities you would like to see benefit from your lifetime of hard work. Creating or updating your will is one of the best ways to articulate your wishes. Also consider using trusts, which sometimes allow more flexibility than a will, to help you meet specific legacy goals. Consult with a financial advisor, attorney and tax legal professional to develop a comprehensive legacy strategy that suits your ultimate goals.
MICHAEL W. K. YEE, CFP
1585 Kapiolani Blvd., Ste. 1100, Honolulu, HI 96814
808-952-1222, ext. 1240 | firstname.lastname@example.org
Michael W. K. Yee, CFP®, CFS®, CLTC, CRPC ®, is a Private Wealth Advisor, Certified Financial Planner ™ practitioner with Ameriprise Financial Services Inc. in Honolulu, Hawai‘i. He specializes in fee-based financial planning and asset management strategies and has been in practice for 32 years.
Investment advisory products and services are made available through Ameriprise Financial Services Inc., a registered investment advisor. Ameriprise Financial Services Inc. Member FINRA and SIPC. 1“Expenditures on Children by Families Report,” U.S. Department of Agriculture ©2019 Ameriprise Financial Inc. All rights reserved.