Financial Planning at 40-Something

If your 20s were for throwing caution to the wind and your 30s were for settling down and starting a family, you may now find yourself in your 40s wondering what the next big chapter has in store. It may not sound as alluring as the previous two decades, but one thing that people in their 40s really should be doing is planning for the financial future of themselves and their families.
“Not having a financial plan is actually just having a really bad plan,” says Alexa von Tobel, founder and CEO of LearnVest.com in New York.
Understandably, however, it is not that simple. Most likely, you are simultaneously trying to save for your children’s college tuition, save for a down payment on a house, and trying to put some money away for retirement. But working closely with a financial advisor can really help you sort out your finances and help you properly plan for the future. Here are several straight-forward tips that will set you on the right track.
Set up an emergency fund: The first step to any financial planning is to set up an emergency fund. You can never plan for leaky roofs or lost jobs, but if something bad were to strike you want to rest assure that you and your family have that cushion that will get you through. Ideally, you want to have three to six months of your normal income in an account that is safe and liquid.
Pay off your debt: Your second priority should be to eliminate any credit card or student loan debt so that your income can be building your future not paying off your past. Check to see if you can consolidate loans, find lower interest rates, and ask your advisor if your student loan debt is tax deductible.
Build your 401(k): In my last column, I discussed the ways in which you can maximize your 401(k). This is a great way to save for retirement. In your 40s you should be saving as much in your 401(k) as your employer matches; this way you can be certain your investment always doubles. People in their 40s can contribute up to $17,500 in a tax-deferred 401(k).
Maximize your IRA: Not only should you be saving for retirement at work, but you should also try to make the maximum allowable contribution to a traditional individual retirement account or a Roth IRA. The difference between the two is that with a Roth IRA you pay taxes now on your contributions as opposed to later when the tax rates are undoubtedly going to be higher.
Save for College: Although it is not always feasible, you should start saving for your child’s college tuition as soon after they are born as possible, even if it is only a small amount at first. If you set up a 529 college savings plan, not only are you starting to prepare for your child’s future, but you might also be eligible for tax benefits.
Assess Your Insurance: For healthy people in their 40s, life insurance is relatively inexpensive, but you want to be sure your family is taken care of should something happen. You should also check your health, home, and auto insurance to be sure that you have the right coverage. Many people don’t find out it’s not what they thought it was until it’s too late.
Don’t let your 40s fly by without being an active participant in planning for your family’s future. If you’d like to talk more about the ways in which you can take care of today’s needs while still preparing for tomorrow, please contact me at

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or (831) 801-4069.