A Financial Checklist for Clients in Their 40s and 50s

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Here’s how to help your clients reevaluate their life goals and needs as they enter the next stage of their lives.

Every decade in life brings new financial milestones, challenges and opportunities. This is no different for clients entering their 40s and 50s. Priorities may shift toward family life and retirement planning. Clients may also find themselves part of the “sandwich generation” – balancing the delicate act of caring for the financial needs of both their growing children and their aging parents. At the same time, many clients will also be in their peak earning years, so showing them how to maximize their wealth will be important in helping them both meet their goals and deliver on their responsibilities.

As your clients continue to reach different financial milestones, it is good to check in on the challenges and opportunities specific to their current stage in life. In particular, here are four things your clients in their 40s and 50s should consider.

1. Education funding and costs

For clients with children who are planning to attend college, paying for tuition can be a challenging goal especially as the cost of college continues to rise. According to US News, the average tuition and fees are $41,411 at a private school, $11,171 for state residents at public colleges and $26,809 for out-of-state students at state schools. To prepare your clients to handle the high costs ahead, ask about their children’s goals for higher education. If that includes attending college, confirm that parents know about 529 savings plans and the option of using an annuity to help pay for tuition depending upon their age and time horizon.

While a very common and useful tool when planning for college and educational expenses, 529 plans may lose value in market downturns, depending upon the allocations selected. Depending on the rules of the state’s 529 plan, your clients may have to pay penalties on the earnings to withdraw savings for other purposes if their child does not end up using the funds for approved educational purposes. Although account earnings are not reported on the FAFSA, they may affect an application for financial aid, depending upon the institution’s rules. Similar to many other financial vehicles, some of these plans include yearly fees and administrative costs.

Another tool to consider as part of your clients’ college saving plans is a fixed or fixed-indexed annuity. An annuity can grow tax-deferred and is protected from downside market risks while providing flexibility for withdrawing funds. However, when proposing this as a strategy, it is important to consider the age at the time your clients withdraw the funds to pay for college to ensure that they will at least be age 59½ and will not be subject to the IRS penalty if under that age, as well as considering the other benefits and charges.