As your age starts creeping up towards mid-life, it’s time to take your financial planning seriously. Here’s our top 5 milestones to reach by 40 to keep you on track for a comfortable retirement.
- Retirement Savings
A good rule that financial advisors use is that by the time you reach 40, you should have three times your salary saved in retirement accounts like 401k, IRA or other retirement-specific accounts.
If you are not there yet, or just getting your life back on track after financial set-backs, don’t worry. You’re still about 20 years from retirement so there’s time to get to where you want to be. If you are self-employed or a contract worker, be sure that you are setting aside at least 10% of your take-home pay. If you are in your mid-late thirties and still paying off debts, put your energy and money into paying off those debts off quickly, then once that’s paid off, put the same amount of those payments into a high yield retirement account in addition to that 10%. You’ll see your retirement savings skyrocket as you pay yourself.
- Credit Scores
In your mid-thirties you should set your sights on improving your credit score a great deal. Aim for a 760 or better and research long-term solutions to keep increasing your score.
- Emergency Funds
Having a cushy emergency fund can be a life saver when life throws you curve balls. Whether that’s an unexpected medical emergency or a layoff due to a bad economy, having enough in savings to keep you afloat for at least 6 months should be the goal. Use direct deposit to start sending $50-$100 per paycheck directly into a savings account that’s harder for you to access, like a credit union that’s on the other side of town so you’ll be less likely to dip into it.
- Life Insurance
If you’ve got kids or a spouse, it’s especially important to have life insurance, as the people who depend on you can be greatly impacted by your passing. It’s not pleasant to think about, but it’s reality. Without life insurance benefits, your loved ones could be on the hook for your funerary arrangements, debts and more. Life insurance policies can cost as little as $15/ month for a 20-year term life insurance plan for $200,000. It’ll give you and your loved ones some peace of mind. If you have a partner, make sure they sign up for one too!
- College Planning
If you’ve got little ones, or are planning for them in the next few year, start saving now. College expenses are exorbitant in some countries and by setting aside money starting now, you’ll be setting your kids up to have option in education. Regardless of it they choose the traditional education routes or opt for a trade education, having that money set aside will give them extra edge in life by reducing or eliminating the need for loans.