Evaluating Midlife Financial Health

Middle age has arrived. It seems like only yesterday you were right out of college, struggling to pay off student loans, and starting life and a career. Now you wonder if you’re being a good boss, hoping the money spent on your children’s college will have been worth it, you’re carrying a mortgage and consistently evaluating your investments.

It’s also likely that you’re thinking about the future, and wondering how the actions you are taking now will pan out. It can be wise to stop for a moment and evaluate your current financial health with an eye to how each of these factors will carry through to your retirement.

Check to see if you’re saving enough for retirement. “Take a look at your savings and any other investments where you are regularly funding for retirement, such as a 401K, pension plan or IRA. Decide how much you would like to have at retirement, and plot out each of these instruments for the years until retirement,” says Martin Walcoe, SVP of David Lerner Associates. “A retirement calculator can help you figure it out.”

Check to see if you have enough diversification in your portfolio. In an unstable financial climate, diversification is important; risk can sometimes be reduced through the investment in a variety of assets. The idea is that the differing assets in your portfolio will not rise and fall at the same rate and you will be able to carry through fluctuations in market conditions. It is best to consult with your investment counselor–in addition to studying up yourself–in deciding how best to diversify.

Check the tax efficiency of your asset location. This is simply looking over your various investments and ensuring that the accounts to which they are assigned will provide the best tax benefits for you. You should consider placing investments that normally cause a high annual tax bill into tax-deferred accounts, and locating tax-efficient investments outside of tax-qualified plans.

Check your level of debt. Especially in these times, assuming a high volume of debt can have serious consequences. It would be worth your while to employ a policy of steadily paying down the debt you do have, and doing your best not to assume more.

Make adequate provisions for known windfalls. For example, will you be expecting an inheritance at some point? If so, you should consider how this sudden influx will affect your financial planning. If you know for sure this money is going to appear at some point, it may serve to help you transition lifestyles or assist you in achieving other financial goals.

Ensure your family is provided for in case something should happen to you. It is always a tough question to face, but in case you should die, has your estate been planned so your loved ones will be taken care of? The factors to consider are your will, your listed beneficiaries in your various accounts, the option of having a living will, and others you should discuss with your attorney.

Along the same lines, make sure your insurance is adequate. A recent study found that 70 percent of the population will need some sort of long-term care. Without adequate coverage, investments, savings, and retirement plans can be exhausted in paying for care. Help ensure the security of these assets by having adequate insurance as a safeguard.

Consider this evaluation as a mid-life “getting your ducks in a row” so that your financial goals remain stable and sound as the years pass by.

Leave a Reply

Your email address will not be published. Required fields are marked *