If you’re just getting started in your career, and therefore, just dipping your toes into the financial planning world, you’ll likely find a lot of information online on what to do first. Likewise, if you’re nearing the retirement finish line, you can find retirement calculators, checklists and tips to follow. But what if you’re somewhere in the middle?
There is a sizable demographic of 40-somethings who are in the thick of their careers. These are prime retirement savings years, because this is often when a person’s income has peaked while their expenses have somewhat leveled off.
Mid-career is also a great time to re-evaluate things like life insurance and your retirement plans, and it’s an awful time to make bad decisions or financial mistakes, because there’s less time to recover from and make up for any losses.
Here are 5 things you should have dialed in by your 40s, especially if you’re hoping to retire in your 60s – a comprehensive financial planning checklist, if you will, for anyone mid-career.
1. A Financial Advisor You Trust
A financial advisor can be a huge financial tool to have in your toolbox, and you should find someone you’re comfortable with by your 40s. A financial advisor can help you set goals and develop a plan for meeting these goals, as well as offer informed, experienced advice on how to handle different situations with regard to money and investing.
If you don’t have a financial advisor yet, contact PAX Financial Group and get the conversation started. If you do have a financial advisor but are ready for a second opinion, this is a good time to check in.
Make sure you do your homework. Financial planning is not a one-size-fits-all equation. While a friend, family member or coworker may have a recommendation, his or her concerns may not be the same as yours. Everyone’s family structure, income, fears, goals and priorities are different. It’s important to work with a financial advisor who specializes in helping clients like you, whether you’ve gone through a divorce, lost your spouse, made it a priority to save for your children’s education or own your own business. If not, you can miss out on strategies that could benefit you.
Of course, location can also be a factor. Retirement planning in San Antonio, for example, is different than in other areas. Do your homework. Contact PAX Financial Group if you’re not sure where to start.
2. Adequate Insurance
When was the last time you re-evaluated your life insurance coverage? Have you changed jobs, bought a new house, gotten married or had children since you last analyzed your insurance policies?
If you’ve experienced these or any other major life changes, it may be time to rethink your insurance. If something was to happen to you, will your family be able to continue living the lifestyle they’re accustomed to?
A comprehensive financial planning checklist for anyone in their 40s and older should include making sure you have adequate insurance to protect your assets and your family.
3. An Estate Plan and a Will
Death can be a difficult conversation to have, especially when it’s yours. But if you have a spouse, a house or dependents, it’s a conversation you really should have. Unlike popular belief, estate planning is not just for the affluent or the older. A will and estate plan, in the unfortunate event you die or are incapacitated, can be a huge benefit for your loved ones. Not only can these documents designate who makes decisions on your behalf, but they determine what assets are left to whom, who will care your children and, if you’re a business owner, what will happen to your company if you pass away. Your assets won’t necessarily go to who you think they should go to.
Similar to your life insurance, if anything significant has changed in your life since you last updated your will or estate plan, you’ll want to dust off those documents and make sure they’re still current and relevant.
4. A Plan to Pay Off Debt
One of the most impactful things you can do for your future is pay off things like credit card bills, student loans and other high-interest consumer debts. Making minimum payments may keep you in good standing with your lenders, but this strategy can add several years to your payoff plan and sometimes even make a full payoff impossible. Remember, the more money you spend on interest, the less you have to contribute to your retirement accounts.
Once you clear those balances, try to keep them low or at zero. If you use credit cards responsibly, they can actually be a useful financial tool, especially if you earn cash back or rewards points.
Whatever you do, after you’ve paid down or paid off your debt, don’t run them back up! This is especially important as you prepare for retirement.
5. Solid Retirement Plans
By your 40s, you should also have at least some idea of how you want to spend your retirement. Traveling? Moving to the beach? Spending time with family? This means you should also have a good idea of how much you’ll need to have saved for your retirement to reach these goals. (If not, contact PAX Financial Group and get the conversation started.)
This means you may need to update your retirement savings plan, as well as adjust your account contributions respective to your current income amount. This is especially important if it’s been a few years, and a few raises, since you’ve done so. Take advantage of any corporate- or employer-matching program for your retirement savings plans if you haven’t already done so.
Your 40s is also a great time to meet with your financial advisor to go over your investments, accounts, risk tolerance and fees. Are they still a good fit for your needs? If not, make some adjustments so all parts of your retirement plans are current and appropriate for you.
Retirement is closer than you think! Use this comprehensive financial planning checklist to help you prepare for this next phase in life.
If you’re not quite 40 or if you follow the 50-is-the-new-40 theory, there’s actually something you can do at any age. Check out my new book, 18 to 80: A Simple and Practical Guide to Money and Retirement for All Ages.
This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.