Mid-life Planning for Retirement without Compromising Other Goals

You may yet regret the fact that you skipped the twenties because you “lacked the funds” to plan retirement when a smaller contribution could have made all the difference. Now in midlife you will have growing children, education expenses and home and car buys trying to grab a bigger share of your savings. However, with a little bit of planning it is possible to make up for the lost opportunities.

Curtailing expenses and augmenting income is top priority

Uninhibited spending of one or both partners and mountains of debts were the number one causes of marriages derailing in the US, and in the majority of instances the families did not have the cushion of an emergency fund to see them through many crises. Curtailing expenses is the first step that has to be matched with additional income from extra jobs to keep the home fires burning and the savings kitty well-funded. The goal should be to last independently on six months savings.

Use the Roth IRA to supplement your existing 401k fund

An employer that matches your 401k contribution is to die for because this is the surest route to substantial savings. Try adding the Roth IRA to your retirement kitty because even though you are taxed now, you will receive tax free income when it counts the most. The Roth maximizes your investment’s value. If you can contribute 15% to these savings you can consider yourself in the safe zone.

Using the retirement kitty to fund a new home down payment

Much as it pays not to disturb the retirement fund, many people are tempted to use the fund to finance a down payment on a new home. If you plan to do this at the mature age of 45 years you may not have enough time left between now and retirement to replenish what you have taken.

Also remember that a 401k loan will attract taxes and a penalty for withdrawing the sum before maturity. The Roth IRA on other hand will not levy either, providing you are buying a home for the first time and you have held the account for at least five consecutive years.

Balancing college savings and retirement savings

It may appear a tall order juggling college and retirement savings but it is not impossible. Use the college cost calculator to comparison shop college expenses in public and private schools. One way to approach college costs is to cover three years through maximum savings, leaving the final year to your current income to handle. If, for example, the average annual college expenses work out to $20,000 annually and you plan to save roughly half the cost for a four year degree, you would need to save a little less than $250, monthly over two decades. The underlying assumptions are that you are getting an 8% return on investments and you are factoring an increase of 6% in college expenses. State subsidized 529 plans with tax free money accumulation and income tax deductions are one of the best ways to save your money.

Using a car equity loan wisely to take care of urgent cash demands

The cash loan for title gets you an amount approximating 60% to 70% of your vehicle’s market value simply by securing the collateral of your car title. This money can be profitably used in a number of ways; you can use it to-

  • Ease a financial crisis without dipping into your emergency fund.
  • Fuel a top investment like a dynamic growth stock or a sharply appreciating index mutual fund that fetches higher returns.
  • Consolidate unsecured loans like credit card outstandings that are draining your income.

The auto equity loan levies an interest rate not exceeding 25% APR, leagues lower than expensive payday loans that don’t give you half the funds title loans do. These auto collateral loans will ensure that your retirement planning stays on course as financial crises melt away as quickly as they come.

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