Financial Planning for Every Stage of Life: When You Feel More Established

You may be nearing a point where you feel very comfortable in your life. You have started having children and building a family, or perhaps you’ve established yourself in your career. This post will focus on financial priorities for those who are farther along in their career and/or family lives but who have not yet reached retirement.

1. Begin saving for your children’s education.

Set up a 529 account and plan for automatic monthly transfers. However, proritize saving for retirement over saving for their college fund. There are loans available to students but not to retirees, and if you end up unable to support yourself, your children may have to eventually support you.

2. Save as much as you can for retirement

If you have become more established in your career, your income is likely higher than it’s ever been. Take this as an opportunity to make your retirement contributions as large as possible to ensure your comfort in the future.

After you turn 50, you are allowed to contribute higher amounts to your 401(k) and IRA — an additional $6,000 and $1,000, respectively, in 2015.

3. Maximize tax savings

With a higher income comes higher taxes. Be proactive about searching for deductions and consider opening a Health Savings Account — allowing you to use pretax money for healthcare expenses. You can also consider taking more investment risks with your after tax accounts, such as a Roth IRA, given that gains in these accounts aren’t taxable.

4. Consider planning for long-term care

You could do so in the form of long-term care insurance. However, this option is often pricey and you aren’t necessarily going to need it. Another option is buying life insurance with a long-term care option. Again, this requires a large upfront investment but may pay off in the long run.

5. Plan your retirement income

As you go from earning money to spending the money you’ve saved, you need to be strategic about the way you use your savings as income.

One option is to purchase an annuity with some of your retirement savings to guarantee a certain amount of income each year. You should also be aware of how much social security you qualify for based on when you plan to retire. Additionally, begin planning for required minimum distributions from your accounts and talk with your financial planner about how you can best pull from your accounts without paying a large tax fee.

Other articles in this series focus on financial planning for those starting their career and for those getting married and establishing themselves in or switching careers.