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Work toward your own Independence Day
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Once again, Independence Day is here, bringing fireworks and barbecues. Of course, the Fourth of July is more than hoopla — it’s a time to reflect on the many freedoms we enjoy in this country. Yet, for many people, one important type of freedom — financial freedom — is still elusive. So you may want to use this holiday as an occasion to think of those steps you can take to eventually declare your own Financial Independence Day.

Here are some moves that can help:

• Create a strategy. Financial freedom doesn’t just happen — it takes planning, patience and perseverance. To work toward your financial independence, you’ll need to create a financial strategy, in conjunction with your financial advisor, and stick to that strategy. Over time, you’ll need to make adjustments, but if your overall strategy is appropriate for your goals, time horizon and risk tolerance, it should help you get you to where you want to go.

• Contribute as much as possible to your retirement plans. Each year, put in as much as you can afford to your 401(k) or similar employer-sponsored retirement plan, such as a 457(b) if you work for a state or local government or a 403(b) if you work for a school or other tax-exempt organization. These plans offer the potential for tax-deferred earnings, so your retirement funds can grow faster than if they were placed in an investment on which you paid taxes every year. Also, if you’re eligible, try to “max out” on your IRA every year.

• Maintain adequate life insurance. If you have a family, you aren’t just thinking of your own financial independence — you have to think of theirs, too. And that’s why you need to maintain adequate life insurance, particularly during the years when your children are growing up. But even after they’ve left the home, you may find that life insurance can be valuable in providing retirement funds for your spouse, should anything happen to you. And if you have permanent life insurance, which contains an investment component, you can generally access the cash value, through policy loans or withdrawals, to help pay for your own retirement.

• Protect yourself from long-term care costs. You may never need any type of long-term care, such as a stay in a nursing home or assistance from a home health aide, but if you do, the enormous costs can threaten your financial independence — and possibly even put an economic strain on your spouse or grown children. After all, the national average rate for a private room in a nursing home is more than $87,000 per year, according to the 2011 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs. And the national hourly rate for home health aides is $21, according to the same survey. Medicare typically pays very little of these costs, which puts the burden on you. Fortunately, some investment vehicles can help you deal with long-term care expenses. Consult with your financial advisor to determine which of these vehicles may be appropriate for your needs.

A national holiday won’t be declared when you achieve your financial independence — but, for you, it will be a time well worth celebrating. So do what it takes to work toward the arrival of that happy day.

This article was written by Edward Jones for use by Laura Evans, Edward Jones financial advisor of Richmond Hill.

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