Five Financial Considerations for Every Age Group

Are you on track to meet your financial goals? Review the following financial considerations for your age group and evaluate where you may fall short.

If you’re in your 20s:

  1. Live within your means. Learn to keep spending in check while you’re young and you’ll save thousands of dollars over the years. Be strategic about spending. Make a budget and stick to it.
  2. Pay down debt. The average college student has $4,138 in credit card debt. This doesn’t include car loans, student loans and other debts. If you have debt, work now to begin paying it off.
  3. Develop a savings habit. Consider a savings account an essential part of your budget. Have a portion of your paycheck direct-deposited to a savings account. At a minimum, build an emergency fund of six to nine months of living expenses.
  4. Begin investing. Take advantage of your employer’s 401(k) plan or other tax-deferred retirement plan. Many employer plans will match all or part of your contribution. If you don’t have access to a 401(k), consider opening a Roth IRA.
  5. Establish credit. It’s important to start establishing credit while in your 20s. A credit card can be one of the most effective ways to do this, but only if you pay off the balance each month. This will help you in the future as you buy a home.
  6. Tackle debt. You’re settled in your career and have a higher income. Now is the time to put more towards your debt. Pay extra on your mortgage and plan to own your home free and clear by retirement age.
  7. Evaluate insurance needs. If you have a mortgage or children, at the very least you should have life insurance in place to pay off the mortgage as well as provide some money to help maintain a reasonable standard of living in the event of an untimely death.
  8. Save for kids’ college education. Consider opening a state-sponsored 529 college savings account for your children.
  9. Increase retirement savings. Increase the percentage you’re saving. Many experts recommend putting at least 10 percent of your income towards your retirement.
  10. Estimate retirement needs. Estimate how much income you’ll need to live on after retirement. Keep in mind that people are retiring earlier and living longer, so you may need more money than you think.
  11. Take advantage of catch-up contributions. When you turn 50, you can contribute an extra $5,500 to your 401(k) or $1,000 to an IRA.
  12. Review your estate plan. Periodically review your estate plan, including your will, durable power of attorney and living will.
  13. Look into long-term care. Consider what long-term care needs you may face in the future and assess your options for covering related costs.
  14. Evaluate your retirement plan regularly. You can get a ballpark estimate of how long your money is likely to last by using an online calculator, but it may be wise to consult a financial planner for assistance with this important step.
  15. Know your Social Security options. Deciding when to start claiming benefits can be complicated. Learn about your options and work with an advisor to determine what’s best for your particular situation.

If you’re in your 30s and 40s:

  1. Tackle debt. You’re settled in your career and have a higher income. Now is the time to put more towards your debt. Pay extra on your mortgage and plan to own your home free and clear by retirement age.
  2. Evaluate insurance needs. If you have a mortgage or children, at the very least you should have life insurance in place to pay off the mortgage as well as provide some money to help maintain a reasonable standard of living in the event of an untimely death.
  3. Save for kids’ college education. Consider opening a state-sponsored 529 college savings account for your children.

If you’re in your 50s, 60s or beyond:

  1. Take advantage of catch-up contributions. When you turn 50, you can contribute an extra $5,500 to your 401(k) or $1,000 to an IRA.
  2. Review your estate plan. Periodically review your estate plan, including your will, durable power of attorney and living will.
  3. Look into long-term care. Consider what long-term care needs you may face in the future and assess your options for covering related costs.
  4. Evaluate your retirement plan regularly. You can get a ballpark estimate of how long your money is likely to last by using an online calculator, but it may be wise to consult a financial planner for assistance with this important step.
  5. Know your Social Security options. Deciding when to start claiming benefits can be complicated. Learn about your options and work with an advisor to determine what’s best for your particular situation.

This article was originally published in Illuminations: Facts & Figures from people with a brighter way, a Rea & Associates enewsletter, 2/12/2014.

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.