What’s In—Taking advantage of free money and workplace benefits. Who says there isn’t a free lunch? Astute individuals know what percentage their company matches on an employer-provided retirement plan and these smarties contribute at least that amount. Mensa-types aim for the high bar and the plan’s annual limit. Those without an employer-provided plan contribute to a traditional IRA every month instead. Self-employed individuals have a multitude of options including SEPS and SIMPLE IRAs. In all situations, you get a tax deduction for your contribution which makes it a win-win situation. Saving is entirely in!
During Your Forties
What’s Out—Paying for mutual funds with loads. Take a look at your investment statement. Do you see Class A, B, or C after the fund’s name? If so, you have paid or will pay fees that you weren’t aware of. Invest in no-load funds instead and save yourself some hefty commission costs. If you need help, contact a fee-only (not fee-based or commissioned) financial planner.
What’s In—Saving for both your retirement and your kid’s college education. Yes, you love your kids, but you can’t get a loan to pay for those thirty years you’ll spend in retirement. Maximize your retirement savings options first and then put the excess into a 529 plan for your kids. Need more encouragement? Both strategies are beneficial from a financial-aid perspective.
During Your Fifties
What’s Out—Extending the term of your mortgage. Do you really want to be in debt and writing monthly mortgage payment checks in your seventies? Fifteen-year, fixed-rate mortgages are in, but thirty-year variable-rate mortgages are completely out.
What’s In—Long-term care insurance from a financially sound company. If the idea of a nursing home makes you cringe, all the more reason to consider long-term care insurance to enable you to stay in your own home. However, don’t skimp on the policy’s term just to save a few bucks. Eleven percent of men and 28 percent of women will need more than five years of care at home or in a facility. If your spouse or partner purchases a policy from the same company, you may be eligible for a discount. Smart individuals know that illness does not discriminate when it comes to age or sex. They buy a policy while they are still young, healthy, and insurable.
