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How to Manage the Midlife Financial Tug of War

Nov 10, 2020 3 min read Eric Rosenberg

Key takeaways

  • Plan and save for your most important financial goals first.
  • Tap into free public resources to assist aging relatives.
  • Maintain open lines of communication.

 

Millions of Americans in their middle years feel as if they’re at the center of a financial tug of war. Retirement, kids’ college tuition and the needs of aging parents form a trifecta of financial strain for many—often at the same time. What’s the best way to get through this phase of seemingly competing priorities?

 

 

The good news is there are sound, proven strategies that can help. If you take the time to budget and explore all your options, you may find it’s easier than you expected.

 

Automatically fund realistic goals

You can only fill others' cups if yours is full to begin with. Spend time focused on your own financial well-being so you can help other family members.

The best approach is an organized one. Review your current monthly spending and create a reasonable budget that includes funding your retirement and emergency savings accounts. Determine how much of the remaining money can go toward other financial goals, like college savings and the care needs of an aging parent.

In an ideal world, you’d have the funds to reach all of your goals, but for most people, that’s not the reality. Whatever you can invest, do so with automatic savings and investment contributions so your money grows without you having to think about it every month.

 

Consider all of your resources

Any money you save on taxes can be invested toward your financial goals. In that way, many retirement accounts work double duty. Invest in traditional and Roth 401(k), 403(b), 457 and IRAs to reap tax benefits while saving for your future. For a child’s education, look to a 529 plan as a potential option. Consult a tax professional for personal guidance on minimizing taxes and maximizing savings.

While you might not get a federal tax break for your parents, the government does offer valuable assistance Opens in new window. Tag-team with other family members to research options and create a workable plan.

Consider supporting your family by identifying other avenues for aid like low-interest federal student loans Opens in new window. Your employer may have a scholarship program for your graduating senior or offer valuable financial planning for your aging parent.

 

Don’t shortchange your retirement

While working through the challenges of paying for everyone else’s needs, don’t forget your own. Funding your own retirement is critical to a successful financial future.

Many large employers offer a 401(k) or similar plan, which not only offers tax savings but can also provide an employer match as long as the employee contributes. If your employer offers this type of matching, be sure to take full advantage of it. Doing so ensures you don’t leave free money sitting on the table.

On top of your employer-sponsored retirement plan, you can open and fund an individual retirement account (IRA) at your chosen brokerage. If you automatically contribute $211 per paycheck on a biweekly pay schedule, you'll reach the $6,000 annual limit for those under 50 years old.

Life insurance is another important part of your long-term financial plan. It can protect your family while simultaneously helping you save for retirement.

 

What you can do next

Sit down with your aging parents to have a candid discussion about the resources they have available and their expectations of you for future support. In the same way, talk with your children and enlist their help in forming a plan to achieve their educational goals.

Footnotes

Eric Rosenberg is a finance, travel and technology writer in Ventura, Calif.

 

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