lhia logo bar
January 2016  Volume 9, Number 1        

financial planning

Your Step-by-Step Guide to Personal Financial Planning in Your 40s

All experts agree that the surest way to have healthy finances your entire life is to create and follow a long-term financial plan. Here’s your step by-step guide to getting yours started.

Step 1 — Establish Your Emergency Fund

Plan how you will create an emergency fund, where you keep at least six months’ worth of living expenses safe and liquid. This account is not only meant for saving money for rainy days (losses incurred by investments, disability, disaster recovery, unemployment, etc.), but also for planned expenses. Proactively assess what big expenses will come your way in the next few years, such as replacing your old furnace or a down payment for a new home, and save accordingly.

Step 2 — Plan to Repay Your Debt

Make reducing and eliminating debt your priority — using all available funds to pay off debt.

Start with your credit card debt and student loan, and pay them down as quickly as you can. Assess their interest rates and see possible options for reducing those interest rates. Check if loans are tax-deductible and how much you can write off.

Step 3 — Take Advantage of Employer matches

If your employer offers a 401(k) retirement plan, find out whether your employer offers a matching contribution. Many employers will match up to a certain dollar amount every dollar you contribute. Contribute as much as you can, because whatever you add simply increases because of the employer match. You can contribute up to $18,000 during 2016. Individuals age 50 and over can make an additional $6,000 “catch up” contribution.

Additionally, some 401(k) plans allow you to make Roth contributions. You cannot deduct these contributions from current income, but you will receive any withdrawals you make after retirement free of income taxes. If your employer does not offer this option, you might want to look into opening a Roth IRA. Your tax advisor can help you determine the proper mix of tax-advantaged benefits for your expected post-retirement situation.

Although retirement may seem far off, being aggressive with your savings right now will let you enjoy the advantages of interest compounding.

Step 4 — Insure

Most people think they are appropriately covered with their current insurance policies, only to realize they’re not when tough times or a disaster bulldozes through their life.

Create your long-term insurance plan based on the needs of your family, your age and current (and expected) economic situation. Start with the most basic requirements first—health insurance and life insurance, if you have dependents. From there, you can expand your portfolio to include disability income insurance, critical illness insurance, long-term care insurance and even annuities.

Step 5 — Saving For Kids

You may have already started saving for your childrens’ college tuition. Although starting early is the best plan of action, you can maximize your savings by starting a 529 college savings plan. Some universities have prepaid tuition plans, which allow you to lock in current rates. (Of course, if you do this, your child will have to go to this university!) Families can also minimize college expenses by selecting lower-cost schools or dividing time between military service/community college and university.

For a review of your financial situation and assistance in developing your financial plan, please contact us.


[return to top]






In this issue:

This Just In...

When to Buy an Annuity…or Not

Wise Choices — Medicare vs. Medicare Advantage

Your Step-by-Step Guide to Personal Financial Planning in Your 40s

Annuities 101


The information presented and conclusions within are based upon our best judgment and analysis. It is not guaranteed information and does not necessarily reflect all available data. Web addresses are current at time of publication but subject to change. SmartsPro Marketing and The Insurance 411 do not engage in the solicitation, sale or management of securities or investments, nor does it make any recommendations on securities or investments. This material may not be quoted or reproduced in any form without publisher’s permission. All rights reserved. ©2016 The Insurance 411. www.theinsurance411.com Tel. 877-762-7877.