Investment Concerns by Age / Part 2: 40-50's - Hilton Head Monthly, December 2007

40’s and 50’s

By the time you’ve reached your forth and fifth decades of life you may be secure in your life’s direction and formed a strong personal and professional network. You expect life to become easier but new challenges appear on the horizon.

Financial demands are heaviest during these decades. Children are enrolled or soon to be enrolled in college and tuition is higher every year. College savings programs such as South Carolina pre-paid tuition assistance and 529 plans can help with college costs if saving is started early. Paying directly out of the checking account while not “planned ahead money” has advantages in that it doesn’t count when the “family contribution” is calculated for the college financial aid package. And, the expenditure falls as peak earning years are reached. Other last minute solutions include home equity loans, student loans, and as a last resort, retirement savings.

Life Insurance is still necessary to insure the earning power that pays the mortgage, family living expenses, college tuition and everything else. The premiums are still affordable but emerging health issues may make it irreplaceable. If rates are not locked in on a term or whole life policy, your age can cause the premium cost to rise out of reach. Long term care insurance is often low on the to-do list for this age group, but this is by far the best time to buy. Make the strength and stability of the insurer a primary qualification, not price

For many, these are "sandwich years”. Retirement savings get squeezed in between responsibility for medical or financial care of parents and costs of raising a family. Make an effort to involve all siblings; unless you are an only child, in the responsibility for an aging parent. There are resources available to help senior citizens with medical expenses and those should be explored before depleting savings. The AARP website offers helpful suggestions to lower medical and prescription drug costs. Reverse mortgages and spending down assets can help conserve a parent’s assets; however, the rules are complex and an attorney should be consulted to avoid mistakes.

Your investment mix should still be primarily growth oriented; since peak earning years are approaching, contributions should be serious. This is the age when plans for a retirement lifestyle begin to emerge. These plans must be funded or they’ll never happen. Unless you retire early don’t take money from your IRA, 401k or 403b prior to age fifty nine and a half, you’ll pay a ten percent penalty and income tax as well. More important, you will lose the compounded growth over time that money can create. Look to balance your investment allocation among stocks , bonds, and cash in a way consistent with your tolerance for risk and need for growth.


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