Fred Harteis News Articles - THE 40S ARE possibly the most challenging decade in anyone's life.
Referred to as the "sandwich generation," 40-somethings often end up financially supporting their college-bound children at the same time that they're caring for their aging parents. Unfortunately, by focusing on all of these dependents, they often forget to take care of their own financial health.
1. Fund a 529 Plan
If you have children, it's time to start thinking about how you're going to afford those skyrocketing college tuition bills. One of the best ways to stow money away for college is through a tax-free 529 savings plan. These plans will invest your money in equity-based mutual funds, including age-based portfolios that become more conservative as your child nears high school graduation. Besides the tax advantage, these plans are also attractive because they keep up with college tuition inflation -- which currently hovers at about 5.9% annually, according to the College Board -- better than college savings bonds.
2. Start Estate Planning
How early is too early to start estate planning? The rule of thumb is that if you're acquiring assets like real estate or cars -- which most 40-year-olds are -- then it's time to start thinking about your estate, says David Phillips, author of "Estate Planning Made Easy." To begin with, you'll need a checklist of your assets. Then, meet with an estate planner. For around $200, they can give you an estimate of your assets' current value, says Phillips. After that, sit down with an estate attorney and let him know who you want to leave each asset to.
3. Purchase a Life Insurance Policy
If your family depends on your income in order to get by, then a life insurance policy is a must. Just make sure you don't wait too long to purchase this insurance. If you hold off on signing up for a policy until age 50 rather than 45, your premiums will double, says Dr. Karen Folk, certified financial planner. When you start shopping for a policy, you'll need to decide whether you want a term or a whole policy. Term policies are more affordable and realistic for most people since you choose the length of time your policy covers based on how many years you expect to have dependents, says Folk. Many people in their 40s choose 20-year policies, which last long enough for their children to reach adulthood, she says. As a rule of thumb, your policy should be worth seven to 10 times your income, she says. So if your annual salary is $100,000, you'll want a $700,000 to $1 million term policy.
4. Start Planning Your Parents' Elder Care
If your parents are nearing 65, it's time to talk to them about the care they'd like to receive as they grow older, says Martin Mesecke, president of a financial-planning firm. If your parents are too well off to qualify for Medicaid, but not wealthy enough to pay out of pocket for future long-term-care costs, you should look into what elder-care services are available in their community. Meals on Wheels, for example, delivers food to seniors at their homes and private agencies with semi-skilled nurses are affordable services that target seniors who need assistance, says Mesecke. Consider these services before signing up for long-term care-insurance, he says. Unless you receive this coverage through a group plan, it can be very expensive for most people, says Mesecke.
5. Don't Ignore Your Retirement
You've taken care of your children and your parents. Now, it's time to look out for your own future. In addition to fully investing in your 401(k) and meeting the company match, you should consider other ways to extend your retirement savings, says Mesecke. Put some money into a tax-deferred retirement plan, such as a deductible individual retirement account (IRA). You'll receive an upfront tax deduction on your contributions, and you'll have more money to invest in mutual funds and stocks. Plus, the earnings, dividends, and trading profits will accumulate on a tax-deferred basis until you withdraw the money. In 2008, singles can set aside up to $5,000 (the limit is increased to $6,000 after you turn 50). Married couples who file jointly can contribute up to $10,000 (it gets bumped up to $12,000 after both spouses turn 50). The deduction starts to phase out for singles with an adjusted gross income of at least $53,000 and at $85,000 for married couples filing jointly.
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About Fred Harteis: Fred Harteis leads Harteis International. Fred Harteis has a background in agriculture and has created many successful business ventures.