Expert Money Advice – What Matters Now!
Do you know the most important financial steps to take in your 40s? From investing in your retirement savings, to your parents’ financial plans, to saving for your children’s college, there are a few key things to remember and focus on in this decade of your life.
If you have children, you absolutely must…be smart about college costs.
Yes, your kids should go to school. No, you shouldn’t bankroll their degree whatever the cost. You’ve spent your life creating a sound financial plan; don’t upend it by suspending your retirement savings or taking out a home equity line of credit to pay for a pricey college. Instead, consider a financial safety school that’s likely to offer your family a generous scholarship package. If you opt for a more expensive school, have your kids borrow fixed-rate federal loans, which you can supplement with federal PLUS loans; take out only as much as you can afford to pay off before you stop working.
If you don’t have children and plan to retire in your current home, you absolutely must…get ahead on your mortgage.
Try to make additional monthly payments now to shorten the life of your loan. Pay off your mortgage before retirement, and that’s one less bill you’ll have to worry about when you’re on a fixed income.
– via Oprah.com
Talking Points In Your 40s
It may be true that actions speak louder than words, but when it comes to finances, often what you talk about is just as important as what you do. You need a clear picture of your money life, your financial future, and the needs of those around you. Do you know about your parents retirement plans? It might be more important to have these conversations than you think.
Max out your retirement contributions:
Ramping up retirement savings now is especially important if you feel as if you didn’t save enough earlier in your career, says Christopher Girbes-Pierce, a financial adviser based in Santa Monica, Calif. “Retirement doesn’t feel nearly as far away as it did in your 20s and 30s,” he says.
If you aren’t already making the maximum contribution into your retirement account (for 2015, you can contribute a maximum of $18,000 to your 401(k) plan), now is the time to establish the habit, Girbes-Pierce says. The task may be more feasible in your 40s, a time when you may be nearing your peak earnings, he says.
One milestone to strive for in your 40s is to have at least three times your annual salary saved in a retirement account, says Andrew McFadden, a financial planner in Fresno, Calif. Rough guidelines from Fidelity Investments, for example, recommend that workers should save three times their pay by age 45 and four times their salary by age 50, if they want to be able to replace 85 percent of their earnings in retirement. (The guidelines are based on a hypothetical worker who earns about $40,000 at age 25 and $70,000 when they reach retirement age.) The exact milestone to hit will vary based on when you want to retire and how much you’ve already saved, says Jeanne Thompson, vice president of Fidelity Investments. Your plan provider may have an online calculator that can help you estimate how much income you’ll have in retirement — which you can use to help figure out if you need to save more.
Talk to your parents about their finances:
When you’re in your 40s, your parents may be in or near retirement. It’s not an easy conversation to have, but talking to your parents now about how much they have saved and what their preferences are for health care can give you more time to prepare for any obstacles that might come up, McFadden says. “If they aren’t in a good place, the first step is just to know that,” he says.
If they haven’t already purchased long-term care insurance, which would help pay for at-home care or for a nursing home, think about encouraging them to buy a policy now, Girbes-Pierce says. If they can’t afford it on their own, think about pitching in to help them pay for it, he says.
Also prepare for other scenarios, such as the possibility that one parent may need to move in with you, McFadden adds. Talk to them about where they want to live and if they would be open to relocating somewhere more affordable, he says. While you’re at it, ask your parents what they prefer when it comes to medical treatment and where you can find their will and other important documents.
– via Washington Post
What’s been the most important money advice you’ve gotten in your 40s?