4 Life Changes That Warrant An Investment Tune-up

By Sally Brandon

If you’re 45 to 65 and are going through some serious changes in your life, you should be thinking about these steps right now:

Life Change #1: New Job

The average American worker changes jobs every 4.4 years, and when they start a new job, their 401(k) plans don’t typically come along. In fact, the vast majority of Americans leave the contents of their 401(k) account with their former employer. As a result, by the time they reach their 40s, many people have 3-5 401(k) accounts stranded in various financial institutions.

While leaving one’s 401(k) accounts at several different companies may seem like a way to diversify, in reality, it’s not diversification. The companies that manage each 401(k) are probably investing your money in similar ways, and chances are each financial firm is hitting you with a slew of hidden investment fees. So, the investor not only has all of their eggs in similar baskets, but they’re often paying fees in each of the baskets that dramatically deplete their savings.

Here’s how to deal with it:

It’s your money and you should take it with you whenever you leave a job. The best practice is to roll each 401(k) account over into an Individual Retirement Account (IRA) and consolidate as many 401(k) accounts as you may have into one IRA account. Doing this won’t cost you a thing, and then you can work with a financial advisor who can help you invest your savings in a way that is truly diversified, and, therefore, more secure.

Life Change #2 – Marriage

As a couple decides to marry and intertwine their lives to the ultimate degree, they should realize that unless they decide not to, they are also intertwining their financial lives. Because people are getting married at an older age these days, the partners often have two sets of finances, 401 (k) plans and bank accounts to blend. Acknowledging this new financial connection can help get them on the strongest footing (as a couple) for retirement and other savings, and not doing so could keep them from optimizing their finances for their future together.

Here’s how to deal with it:

Regardless of whether this a first or subsequent marriage, when a couple gets married, both partners should get a sense of any and all bank accounts, savings accounts, and 401(k) plans they have between them. Then, they should jointly meet with a fiduciary investment advisor (someone who is legally obligated to act in their best interest) to decide the best allocation of both of their funds. This is also an important time to review their list of beneficiaries, as they may change with the new marriage.

Life Change #3 – Sending A Child to College

For many mid-life adults, preparing to send a child to college can be a financial wake-up call. Since college is so expensive, it often overshadows other financial goals. When faced with a choice between putting money toward their children’s college savings funds and saving for retirement, most people think that it’s better to invest in their child’s education. However, the fact is that students and parents can borrow money through low-cost college loans, but you can’t take out a loan for your retirement. College savings funds, such as 529 plans, offer the advantage of tax-free growth, but often have high fees and limited fund choices. And, as the child gets closer to college, the funds always skew toward lower-yield investments. Other drawbacks of 529 plans are penalties for withdrawing money for non-educational purposes and reductions in possible need-based financial aid.

Here’s how to deal with it:

Don’t take the bait that a college savings plan is the best and only way to invest for your family’s future. In fact, there are other types of investments, such as index funds, that can help you not only gather money for education, but also make sure Mom and Dad have a secure retirement that the child will not have to supplement one day. Don’t be afraid to use low-fee college loans to pay for school costs, as your money could grow at a faster rate, and with lower risk, through low-cost index investing.

Life Change #4 – Death of A Loved One

Many times, the tragedy of losing a spouse or parent is made more difficult when the remaining spouse or child was not the one responsible for managing the family’s finances. This surviving loved one may be already overwhelmed by the loss, and sorting through the spouse or parent’s financial affairs may be a huge challenge. There may also be an inheritance that has to be invested and/or shared among beneficiaries.

Here’s how to deal with it:

Even though this person is dealing with possibly the most tragic time in his or her life, at some point when they start to get their lives back on track, they really have to take some time to have an honest conversation with a professional about your investments, including any money you may have inherited. Look for a financial advisor who is a fiduciary. This advisor can help you get a handle on your finances, keep you abreast of the status of your investments throughout the year, and make sure you are on the path to a secure financial future.

As a wife, mother, and senior member of the Rebalance IRA team, Brandon brings an intuitive understanding of the personal side of retirement saving. She understands the difficulties encountered in thinking about retirement in one’s 40s, or even 50s, and how to navigate competing financial demands. Brandon began her retirement investment career at MarketRiders, where she supported many of the company’s retirement-investor clients. Brandon received a B.A. from the University of California at Los Angeles and an M.B.A. from the University of Southern California. She is also a registered Investment Representative and holds a Series 65 securities license.