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10 Vital Financial Steps to Enhance Mid-life Success

Are you experiencing any of the following?

  • Do your birthday cards from friends and family make fun of your age?

  • Do you sometimes fall asleep when you try to watch your favorite streaming shows?

  • Do you often wake up in the morning with some new, random pain?

  • Do you get compliments about how young you look “for your age”?

If so, then you could be approaching the age of 45 or maybe even be closing in on the dreaded 50-year mark! But being in this age range also has its pros. For example, your life may be much easier and simpler than it used to be. You may have more control over your work and home life. You may no longer be taking care of small children, spending every minute attending to their many needs. You have likely had your share of successes and failures and have now developed mental resiliency that younger people simply don’t have yet.

The best thing about the midlife plateau is that your finances are typically in much better order than those “crazy kids” in their 20s or stressed-out thirty-somethings. Still, there are steps you can take now that will make your future even better. My wife and I crossed the dreaded 40s bridge about 20 years ago, and we developed 10 vital tips from the other side of the bridge for those in that age bracket. The tips below are for you and a partner but still apply even if you’re single.

10 Tips for Mid-life Financial Success

1. Effectively coordinate with your partner.

Other tips or actions pale in comparison. Failing to agree or decide on your overall goals/objectives is an absolute dream killer. And financial planning becomes really important at this point in your life/lives. Setting dinner dates for life and goal planning sessions is a good way to put you both in a positive frame of mind for this task.

2. Project a date you expect to begin supplementing your income with your investment profits.

No one will hold you to this date, but it will definitely have an impact on your psyche and make the transition more “real.” This one action can change your entire perspective on your life objectives and provide motivation to supercharge your current efforts.

3. Be prepared for your investment portfolio to change over time.

To facilitate your changing views in response to evolving financial conditions, create a portfolio in your various investment categories with your ideal percentages, not actual dollar amounts. Fill in your current dollar amounts based on your latest total balance. Remember, you and your partner are a team, so the investment portfolio is actually a reflection of both your investment accounts combined (not two separate portfolios). Also, remember that those with diverse portfolios typically make more money than those who do not diversify. Diversity is the second-most important principle of investing (the most important principle being compounding interest).

4. Roll over/combine retirement accounts.

Remember, this is a rollover and not a withdrawal. No taxes should be charged. Contact a brokerage firm (Fidelity, Charles Schwab, Edward Jones, etc.) and set up a rollover IRA (Individual Retirement Account). Next, work with your new brokerage firm to roll over (transfer) your old accounts from your prior employer(s) (and other accounts) to your new IRA. It takes a little effort, but this action will likely pay big returns over time due to lower fees, more investment options and easier integration into your overall portfolio plan. Your partner needs to also create a rollover IRA. You can’t combine your and your partner’s funds into one account due to tax rules, but you can list all accounts on paper as one “pie” for strategizing purposes.

5. Fund ROTH accounts ASAP.

By funding ROTH accounts (yours and your partner’s) with after-tax money, the tax flexibility can enable you to stay within a favorable tax bracket and prevent withdrawals from your 401K or IRA from pushing you into a higher tax bracket. If you are already funding ROTHs, continue doing so!

6. Explore total market index funds and S&P index funds.

These types of funds have built-in diversity and can be bought with super-low fees, which can make them great primary investment vehicles.

7. Keep some money readily accessible.

Short-term CDs and/or money market funds allow you to have a cash flow without having to sell your index funds, which could be earning much higher rates. Plan to keep a small portion of your portfolio in these easily accessible accounts purchased brokerage firms, credit unions and banks (shop around for best rates). CDs and money market accounts can also provide funding should you decide to buy index funds when they go on sale (when the market is down).

8. Don’t be too conservative once you retire or are near retirement.

According to the Social Security Administration, a person in their 40s today can expect to live another 30 to 50 years. If your portfolio is 60%–70% or higher in fixed accounts or other “safe”/conservative investments, you are probably not going to be able to generate the income you need to fund your life. Market downturns usually don’t last more than a few years. Meanwhile, inflation keeps on rolling. Don’t handicap your future with too conservative of a portfolio.

9. Consider withdrawing from the oldest partner’s accounts first.

Currently, you must take required minimum distributions from 401K and IRAs (not ROTHs) at age 72. Withdrawing from the older partner’s IRA first will lower the required withdrawals later. Leaving money in the younger partner’s account longer takes advantage of time/compounding interest in the investments/market to allow it to grow even larger.

10. Get my book, The Illustrated Guide to Financial Independence by Larry Faulkner and Douglas Brown (illustrator).

The book covers all of this information and more.

In your 40s, the time for procrastination is over. It is time to get busy creating the future of your dreams. Remember, if you do nothing, you typically get nothing! Time to get busy.

—Larry & Lisa Faulkner

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