Gen X’ers Must Juggle a Variety of
Financial Issues
May 28, 2012
If you’re part of “Generation X” — the
age cohort born between the mid-1960s and the early 1980s — you’re
probably in one of the busiest phases of your life, as you’re well into your
working years and, at the same time, busy raising a family. But just as you’re “multi-tasking”
in your life, you’ll also need to address multiple financial goals.
In
seeking to accomplish your key objectives, you may be asking yourself a variety
of questions, including the following:
•
Should I contribute as much as possible
to my IRA and 401(k)? In a word, yes. Your earnings on a traditional Individual
Retirement Account (IRA) and a 401(k) grow on a tax-deferred basis, so your money
can accumulate faster than it would if placed in an investment on which you
paid taxes every year. Plus, since you typically make 401(k) contributions with
pretax dollars, the more you contribute, the lower your taxable income. And
your traditional IRA contributions may be tax-deductible, depending on your
income. If you meet income guidelines, you can contribute to a Roth IRA, which
provides tax-free earnings, provided you meet certain conditions.
•
Should I put away money for my kids’
college education? It’s not easy to fund your retirement accounts plus save
money for your children’s college education. Still, college is expensive, so if
you feel strongly about helping to pay for the high costs of higher education,
you may want to explore college funding vehicles, such as a 529 plan, which
offers tax advantages.
•
Should I pay down my mortgage or invest those
funds? Most of us dream of freeing ourselves from a mortgage someday. So,
as your career advances and your income rises, you may wonder if you should
make bigger mortgage payments. On one hand, there’s no denying the
psychological benefits you’d receive from paying off your mortgage. However,
you may want to consider putting any extra money into your investment portfolio
to help as you work toward your retirement goals. Work with your financial advisor
to determine what may be most appropriate for your portfolio.
•
Do I have enough insurance in place to
protect my family? You may hear that you need seven or eight times your
annual income in life insurance, but there’s really no “right” figure for
everyone. You may want to consult with a financial advisor to determine how
much life insurance is appropriate for your needs.
•
Am I familiar with my parents’ financial
situation and estate considerations? Now is the time to communicate with
your parents about a variety of issues related to their financial situation and
estate plans. The more you know, the better positioned you’ll be to provide
assistance and support if and when it’s needed. Just to name one example, you
should inquire of your parents if they’ve designated a durable power of
attorney to make financial decisions for them in case they’re ever
incapacitated.
By
answering these questions, you can get a handle on all the financial issues you
face at your stage of life. It may seem challenging, but taking the time now
can help you better position yourself to reach your financial goals.