It’s true. Money can’t buy happiness. You can’t simply walk into a store and purchase it over the counter or off the shelf. It can, however, open avenues that allow you to pursue happiness, giving you the flexibility to chase what makes you feel fulfilled, understood and complete. That flexibility is called financial freedom, and it occurs when you’re no longer beholden to restrictions placed upon your goals and your desires by your unique circumstances.
We also truly believe that financial freedom is achievable for everyone, no matter their income level, present outlook or future objectives. But what opportunities does financial freedom typically unlock, and how do those change as you age and progress through both your life and your career? Let’s go over a few phases and milestones as well as the possibilities that may be availed to you through securing your financial independence.
It’s never too early to begin your quest for financial freedom. Similarly, it’s never too early to actually achieve it. In your 20s, it might begin with the ability to start paying off those expensive student loans that can potentially bog you down later in life. You should be in the beginning phases of your career, looking to make your mark, climb a ladder and experience a tremendous amount of growth as you learn who you are in a professional capacity. Use this time to learn and accept the traditional lessons while also voicing what makes you unique, all while collecting paychecks that ideally allow you to pay down high-interest debt, make a down payment on your first home or consider starting your family. While young and spry, financial flexibility can also allow you to travel, plan for a wedding, move cities to chase career opportunities, or start a side hustle or passion project. In your 20s, the possibilities are endless, and detaching yourself from financial limits can help you make the most of your youth. And remember, saving any amount, no matter how small, can have a huge impact on your future financial freedom because of compound interest. As Einstein said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
By your 30s, you might be a bit more settled, either with a family or an idea of when you’ll begin your family. You may also have a better idea of who you are, your goals, your dreams, your passions and your desired lifestyle. Financial freedom in this stage can allow you to indulge in those dreams, potentially with grander vacations, elimination of hand-cuffing debt, continued repayment or payoff of your home loan and car, and the ability to provide for your loved ones. If you’re lucky enough to eliminate debt, it can be a great time to consider saving or investing more for the future while continuing to maintain your current lifestyle expenditures. You can also consider an estate plan or a life insurance policy to protect those who might rely on you, giving both you and your beneficiaries some peace of mind should something happen to you.
Once you reach your 40s, you’re likely quite used to the life you’ve built and the family you’ve raised. You may also be more comfortable financially, as you’re deep into your career and have adapted with the industry you work in. That’s why in this stage, freedom is about satisfaction. With more security in your profession and better backing in your bank account, you could continue to travel, look for a second home and provide for your beneficiaries. Additionally, your children may be reaching the point at which they need to consider how they’ll pay for college. Though parent-owned 529 accounts do figure into how much federal aid a student qualifies for, other methods, such as permanent life insurance policies, may not, making them a potentially valuable tool. At the same time, your parents may be progressing into their next stage of life, and they may need your help whether that’s simply via your time or your funds. Proper preparation may be able to help you accomplish all of these.
If you experienced financial freedom in previous decades and were able to pay off outstanding debt, home loans, car loans, student loans and more, your 50s could be the perfect time to sock money away for retirement. You’re now closer than ever to retirement, making this the most important time to ensure that your accounts are well-funded, you’re prepared to move on to a fixed income, and you’re protected from market volatility in the final years of your career and first few years of your retirement. If you haven’t in a minute, it could also be a good idea to reassess your beneficiaries, your estate plan and your life insurance policy. You may be able to make necessary tweaks and plan to pass your wealth as tax-efficiently as possible. Additionally, if you’ve shored up all aspects of your financial and retirement plans, you may have some flexibility to spend on things like vacations, charities, vow renewals or other recreational expenditures.
In your 60s, you may be on the cusp of retirement or already in retirement. You can file for Social Security at age 62, but it’s important to remember that filing prior to your full retirement age will permanently reduce your benefit. That’s why this could be a good time to do your final pre-retirement planning, which could include the creation of income streams to keep you afloat while you wait until your full retirement age. You may also be in a comfortable enough position to begin looking at vacation homes, pursuing your various hobbies, checking off bucket list items or even just enjoying a little bit of downtime. Grandchildren may also be on the way, or you may already have them. In that case, financial freedom can grant you the power to spoil them, either with memories that will last or with a long-term college fund. Unlike parent-owned 529 plans, grandparent-owned 529 plans do not count when calculating how much aid a student qualifies for, so they may be helpful tools for your grandchildren looking to achieve higher education.
At this point, it’s likely that you’re retired. Not only have you reached your full retirement age; you may have also permanently increased your benefit by waiting through that special birthday. Now, with financial freedom, you may have the monetary means to match your ample free time. The world is your oyster, and with sufficient retirement funds, you can plan fun things depending on your hobbies and your passions. If you enjoy travelling, it could be a great time to take that once-in-a-lifetime trip that you no longer have to request time off work for. You might also be able to tack onto a collection you’ve been building for decades. Maybe retirement simply means more time to spend with friends and family, and now that your time and your finances are flexible, you can develop those relationships without any inhibiting factors.
80s and Beyond
Though you may slow down as you get older, financial freedom never becomes less important. In this phase of life, it may be critical to consider the possibility of needing long-term care. Roughly 70% of Americans over the age of 65 will need some type of long-term care , so while it’s nothing to be ashamed of, it can be a good idea to be prepared. Still, however, you don’t have to stop living your life. You can continue to utilize your free time as you please, but your hobbies may change. You may want to prioritize your health and your personal connections. You may also discover that you have a shift in philosophy, finding joy in activities that require less physical activity such as visiting art shows or attending theatre performances. Furthermore, though you should consistently be revisiting your estate plan throughout the years, this is perhaps the most crucial stage. Reviewing your beneficiaries and ensuring that your tax professional and estate attorney are helping you pass your wealth in the most tax-efficient manner possible can help your loved ones attain financial freedom themselves.
This article is not to be construed as financial advice. It is provided for informational purposes only and it should not be relied upon. It is recommended that you check with your financial advisor, tax professional and legal professionals when making any investment or any change to your retirement plan. Your investments, insurance and savings vehicles should match your risk tolerance and be suitable as well as what’s best for your personal financial situation.
Advisory products and services offered by Investment Adviser Representatives through Prime Capital Investment Advisors, LLC (“PCIA”), a federally registered investment adviser. PCIA: 6201 College Blvd., Suite 150, Overland Park, KS 66211. PCIA doing business as Prime Capital Wealth Management (“PCWM”) and Qualified Plan Advisors (“QPA”). Securities offered by Registered Representatives through Private Client Services, Member FINRA/SIPC. PCIA and Private Client Services are separate entities and are not affiliated.