Older sets love to toss around the term “millennials” to describe naive young adults who have yet to meet the big, mean world outside. The truth is, the oldest millennials are now turning 40. They’re doing things like retiring from 20-year military careers, managing their parents’ finances and filling out college applications for their own children.
Like all those who came before, today’s 30-somethings likely feel some trepidation about staring down the big 4-0 — and if they’re not prepared for the pressure, they could stumble wallet-first into a financial mid-life crisis. Passing your prime and staring down eternity is hard enough without suffering self-inflicted financial wounds. Here’s what the oldest millennials need to know.
Don’t Let the Fear of 40 Stoke Fantasies of a Trophy Business
Some people squander their savings on a Corvette in middle age because they always wanted one and they can finally afford it. Others do the same thing with a business. Starting a business at 40 can be great, but starting a business because you feel like you should be a business owner by now is always a recipe for disaster.
“If you are thinking about finally starting your dream business, do so intentionally,” said Kenny Senour, a certified financial planner with Millennial Wealth Management. “Make sure you have adequate cash savings in place, little to no debt and that you see a path to economic viability.”
Your personal and financial position, not your age, will determine your readiness.
“Being a business owner can be a great path to independence and better income over the long run, but do not use a certain age or a midlife crisis as the main reason to start your new business,” said Senour. “You still have plenty of time to take that next step and making sure your business is started on solid ground will benefit you in the longer term.”
Look At Middle Age as a Second Chance at Retirement Planning
Once you sleep off your 40th birthday celebration, you should return to the world with the next phase of life on your mind — retirement.
“While retirement contributions are important at every age, millennials may not have prioritized these contributions earlier in life as they worked on saving for major life expenses,” said Sam Zelinka, who runs a personal finance website for federal employees called GovWorkerFi and who self-identifies as “one of the geriatric millennials approaching the age of 40.”
Zelinka said that expenses like weddings, down payments and daycare often force young people to shelve retirement planning. If this sounds familiar, don’t worry — middle age offers an opportunity to regroup.
“Even if you have not started saving for retirement, you still have 25 years until traditional retirement age,” Zelinka said. “Sitting down and planning your retirement strategy is an important step you can do to make sure you avoid a financial midlife crisis.”
If You Have Children, Plan Like a Grown-Up
Entering middle age is stressful enough, but that stress is magnified when you include the responsibility of raising a family.
“That’s why it’s important to take advantage of all the ways you can save and invest more for your children,” said Kimberly Hamilton, millennial money expert and founder of Beworth Finance. “Invest for their education using a tax-deductible 529 account, take advantage of the IRS tax child credit payments and start a sinking fund for things like childcare, back-to-school supplies and family vacations. Setting these accounts up early will help you feel much more in control, giving you more time and mental headspace to enjoy with your family.”
When it comes to financing your children’s education, however, there are lines that shouldn’t be crossed.
“Your children (may be) getting close to college age,” said Denise Thomas of Get Ahead of the Class. “Don’t co-sign for your child’s college loans. Plan ahead instead since co-signing makes the loan 100% yours just as it is 100% your child’s. When you co-sign for your child’s student loan it significantly reduces your buying power and can adversely affect your credit.”
Boomers vs. Millennials: The True Financial Gap
The Time To Plan for Old Age Is Now
Millennials might still feel young at age 40, but like it or not, physical decline awaits on the other side of the hill. If you don’t plan for it, your loved ones will pay the price.
“You should have an updated and accessible estate plan, which at a minimum should include a medical and financial power of attorney and a will,” said Mary Kate D’Souza, co-founder and chief legal officer of Gentreo, a boutique online estate planning software firm. “These three documents can potentially save you thousands of dollars and protect you and your loved ones.”
Today’s 40-year-olds, after all, have seen firsthand just how important estate planning can be.
“The pandemic has shown us that life can change in an instant and it’s critical to be prepared,” said D’Souza.
Similarly, it might be time to steel yourself for the realities that come with having parents in their senior years.
“Seek out professional guidance through a fiduciary and someone with no conflicts of interest for help with managing an estate and inheritance,” said Senour. “It’s been estimated that millennials will be inheriting anywhere from $30 trillion to $68 trillion over the next decade or more from the previous generation, so seeking help to navigate the additional complexities of a massive windfall will be vital.”
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Last updated: Sept. 2, 2021