Stay the Course.
Even though you may be smack-dab in the middle of raising kids, paying mortgages and car loans, or footing the bill for college educations, ‘mid-life’ is not the time to ignore retirement savings. On the contrary, it’s one of the most crucial periods of investment growth, savings contribution, and overall financial health. Make good use of it.
Kick your savings into high-gear.
- Make certain you’re contributing the maximum amount to your employer’s 401K plan. If your employer doesn’t offer a 401K or perhaps you run your own business, make sure you’ve opened an Individual Retirement Account (IRA) most appropriate for your financial situation and that you’re contributing the maximum amount each year.
- Find other savings vehicles that make sense for your age and retirement goals.
- Begin investing in a well-diversified stock portfolio or mutual funds.
- Make sure you’re saving at least 10% of you’re your gross income – every month.
Get rid of debt.
- Assess your spending. If you continually spend more than you make, you’ll find it impossible to maintain or increase savings – and you may find yourself sinking into high-interest rate debt. Bottom line? Live within your means.
- Avoid credit card debt. If you have it, make a plan to pay it off as quickly as you can reasonably manage. If you don’t have it, stay away from it. Use your credit card only for convenience (or rewards points) and make sure you pay off the entire balance each time you receive a statement.
- Think about your total debt. What would happen if you or your spouse could no longer work or earn money? Reduce your debt load to a number that can be managed after a significant loss of income. Consider consolidating multiple debts into a single, lower interest rate option to better manage monthly payments and potentially free up more cash for savings.
Get Insurance. Keep Insurance.
- Make sure you and your spouse or other family members have enough life insurance to replace lost income, cover financial obligations, and pay for final expenses.
- Strongly consider disability insurance. What if something happened where you or your spouse could never work again and/or required long term care not covered by medical insurance? An event like this can be financially catastrophic, quickly eliminating any savings you’ve amassed.
- Start considering long-term care insurance. As you reach mid-life, think about what would happen if you had to pay nursing home or assisted living expenses for yourself or a loved-one. Those costs add up quickly – and can quickly deplete your savings.
Take care of your kids. Take care of your parents. Within reason. When you reach mid-life, you may find yourself squarely ‘in the sandwich’; stuck between children who aren’t quite yet financially independent (or who have decided to return home) and aging parents who need more assistance than you imagined. While this may be a stressful time both emotionally and financially, it is not the time to forget about you.
The Kids:
- At this stage in life, it’s more important for you to save for retirement than to pay ‘out-of-pocket’ for college tuition. Don’t sacrifice your retirement to higher education expenses. Consider student loans. Apply for scholarships whenever possible.
- If you have time and money to save for college, contribute to a tax-free 529 plan or even state-based prepaid options that let you save money if your child attends a state school.
The Parents:
- If you haven’t already, it’s time to have a serious conversation with your parents about aging. Do they plan to stay in the house? Are they hoping to move in with you? Do they have enough money to get by? Once you answer these questions, make a plan that will provide a level of comfort for your parents without destroying your future plans.
- Consider paying for a long-term care insurance plan for your parents. While the premiums may be much higher – they’re likely to be cheaper than nursing home costs.
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