Planning for couples in their 30s and 40s

KNOXVILLE (WATE) – We are continuing to give you more for your money as our retirement series continues.

Certified financial planner John Fawaz shares information on how couples in their 30s and 40s should plan for their futures.

Life Insurance: Most couples are under insured. The rule of thumb every $100,000 of life insurance replaces $500 of monthly income. If you think your family will need $3000/m at your death then you need $600,000 of life insurance. Sounds like a large number but 20 term is very inexpensive. Buy life insurance because of the insurance it provides and avoid those plans that offer investment options.

Will: What if you do die without a Will? If you do State of Tennessee has a Will for you and it might not be what you have in mind. Especially with young kids you want to make sure you name a guardianship in an event of a premature death. You don’t want a judge to decide that. Ideally you want an attorney to draft one but if your needs are basic there are a lot of sites online like Legal zoom for under $100 you can have one.

College Planning: Young couples are often obsessed with college planning for children. The focus should be your retirement planning. Make sure you are saving enough. Most people don’t want to burden their kids when they grow up. If you have extra money divert toward becoming debt free.

Retirement Planning: Starting early makes a difference for instance a 30 year old saving $10,000 annually to age 65 at 7% the investments will grow to 1.4 million. If you delay 10 more years to start at 40 year will grow to 630K. Start saving what you can and then going forward save half your raises /annual bonus. One thing I also want to mention invest in ROTH 401/IRA. Most people like the traditional IRA/401 because of tax saving. Instant gratification but long term you will end up paying a lot more. Roth for most people is the way you go unless you are in a very high tax bracket.

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