Clarity Stage – Defining What Is Important
Women in this stage have entered the “golden period” of retirement planning, when they now have more spare cash. That is the period when your standard of living starts to settle down and you are at the peak of your income earning. For most people, it should be sometime in their late 30s to early 40s. At this point, luxuries suddenly look a lot more affordable, and so, you start to tell yourself “If not now, then when?” when it comes to buying things. However, spending can quickly deplete any excess in disposable income, so it is prudent to have a plan that will aggressively grow your wealth through savings and investment for retirement.
Why do working women in their forties need to plan differently from her younger peers? As said earlier, usually someone in this stage is at the peak of her career and earning a good income. However, one may have to stop work for a period to be caregiver, which means she essentially has to temporarily become a wealth decumulator in the accumulation phase. Or she may stop working to give birth/raise her children. There are various financial planning priorities that may apply to you, and you can read about them in my other articles, such as how to mitigate major financial risks and what to do about caregiving risk.
Let’s take as an example, Ms Chua, who is a friend and client of mine. She is single, and an only child who is expecting to inherit her parents’ property. However, she works in the web design industry which offers her exciting growth opportunities in the short term, but one of her concerns is getting burnt out from the constant need to be creative and meet deadlines in her job.
As she is currently in her early 40s, she is thinking more seriously of her long-term financial plans and wondering how she can plan beyond basic insurance and savings plans. Considering that she is already in line to own a property gift in future, the question she is likely to ask is “What’s next?” as there doesn’t seem to be anything else tangible that she needs to aim for.
My advice to her that was that being an only child, she needs to consider the possibility of having to stop or reduce her workload earlier, in the event that she needs to become a caregiver for her parents, or just to simply take care of them. Hence, at this stage of planning, it is good for her to consider a good financial plan with more disposable income, because this will allow her to maintain her sense of security and freedom in future.
Women in this stage tend to neglect their own insurance needs. In addition, work usually takes a toll on their health and affect their eligibility for insurance coverage. Hence, it is important to look deep into their retirement needs so they can be prepared for all situations.
To define what you want during this stage, you will need to work through the three decisions:
1. Decision on Home – Where do you want to stay?
2. Decision on Assets – What do you want to own?
3. Decision on Work – When do you want to stop?
With these priorities in mind, you have a better road map to guide you through which steps to take next.