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‘Gen X’ers’ must juggle a variety of financial issues

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Joseph Ortiz

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Posted: Tuesday, May 15, 2012 2:45 pm

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.

• This article was written by Edward Jones for use by Ahwatukee Foothills Edward Jones Financial Advisor Joseph B. Ortiz, CRPS. Reach Ortiz at (480) 753-7664 or joseph.ortiz@edwardjones.com. Chartered Retirement Plans Specialist and CRPS are registered service marks of the College for Financial Planning.

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