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Managing Your Finances in Your 40s

October 21, 2021
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Most people would argue that your 40s are one of the best times in your life. You’ve hit your stride—from your personal life to your career—and have learned how to juggle boardroom meetings and soccer practice. From a financial perspective, this is really where the rubber meets the road.

Check out this list to see if you’re on track in your 40s:

  1. Invest outside of your retirement workplace account. If you’re taking advantage of your 401(k) and maxing out your contribution, it’s time to start investing outside of your workplace plan. Contribute to a Roth IRA until you no longer qualify. Start thinking about diversifying your investment account types—most people have the bulk of their investments in tax-deferred retirement accounts. Planning to invest in taxable accounts will give you the freedom to access your investments should you need it for a large purchase. 
  2. Establish college savings plans. If you have children, college will be here before you know it. 529 plans are a great way to start saving.
  3. Cut your debt. It’s time to get serious about reducing your debt load. If you have credit cards, student loans, or medical bills, create a plan to get out of debt. If your interest rates are high, consider using a home equity loan to pay off your high interest debt. This must be paired with a plan to get out of debt, otherwise you’ll end up where you started. Your 40s are the time to plan to pay off your mortgage by retirement.

And a bonus health tip for your 40s:

Know your numbers. Your 40s are a good time to investigate your numbers for blood pressure, cholesterol levels, blood sugar, and body weight. Knowing them will help you and your doctor identify potentially hidden disease risk factors.

Here’s to a healthy and prosperous life!

Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.

Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This information is found in the issuer's official statement and should be read carefully before investing. Investors should also consider whether the investor's or beneficiary's home state offers any state tax or other benefits available only from that state's 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investing in any state's 529 Plan.