40 or Older? You Can Still Whip Your Finances Into Shape
3. If You Aren’t on Track to Save Enough for Retirement …
The amount you need to squirrel away for retirement is the largest stash of money that you’ll ever need to save. To find out if you’re on track, do you know how much …
- you need to save in order to support yourself for 25 years or more?
- you need to put away every month in order to reach this goal?
- you’ll need to live on every month in retirement, taking inflation into account?
If you don’t know the answer to each of these questions, you must start contributing–or increase your contribution–to your retirement account(s) today.
If you have a full-time job, start contributing at least 5%—or more, if you can swing it—into your 401(k) or other employer-based account. And those with and without full-time jobs should also boost their IRA contributions—up to the limit. If you’re unsure of the kind of accounts you need, use these 401(k) vs. IRA flow charts to find out, based on your tax filing status:
And this flow chart shows you which IRA you need.
If you haven’t opened an IRA, use this checklist to learn how to open an investment account.
4. If You Have Young Children or Plan to Have Kids …
Your biggest challenge is college tuition fees, which will hit you around the same time that you’re in the home stretch of saving for retirement. Your top takeaways:
- Between saving for retirement and saving for college, retirement takes priority. Why? While there are loans for college, there are no loans for retirement.
- You can, however, save for retirement and college at the same time. Create a budget by calculating how much you need to contribute to retirement each month, compared to college contributions. (If you don’t have one yet, use this checklist to open a college savings account.)
If you’re expecting, consider taking the Baby on Board Bootcamp to find out how to accommodate your little one financially.
5. If You’re About to Pay for College …
If your little ones are, well, big, then you need to know how to take out student loans smartly, and how to apply for financial aid. (Review these top student loan mistakes, so your kid gets the right education for the right price. And be aware that private student loans are a bigger financial burden than federal aid.)
Don’t let your child become another statistic in the student loan crisis–or one of the 20-somethings out there with high debt and few employment prospects.
The top things to consider:
- The amount of the loans vs. the earning potential of the student post graduation: Does it make sense to take on $150,000 in debt for a job that maxes out at $35,000 a year?
- Should your child start out at a junior college or a community college and then transfer to a four-year university? (Many community colleges also now offer four-year degrees through reciprocal programs with state universities.)
- Can your child work part-time while in school or do a work-study program? Both of these opportunities will teach your kid the value of time management—and offer practical work experience.
Finally, if you’re a little late to the 529 game and wondering if opening one now still makes sense, check out Saving for College 101.