Old Rules for New Money
| Simple tenets of financial fitness you may have forgotten Get college covered Never, never raid your retirement funds to cover the expense of putting your kids through college. Instead, start saving early with 529s; the best-performing plans in the country are in Utah, Michigan, Virginia, and Alaska, according to fund-research firm Morningstar. To cover the remaining gaps, fill out the FAFSA (Free Application for Federal Student Aid) at fafsa.ed.gov, which is your skeleton key to all available federal grants and loans and some state and private aid. | |
The most well-planned retirement can be destroyed by a long-term disability. You may have a policy through your workplace. About half of midsize and large corporations now offer them. But if you're not covered, consider getting your own policy. It will provide stipends of around 60 percent of your regular salary to cover ongoing medical bills and loss of income. | |
Distributing your assets among multiple categories—stocks, bonds, real estate, cash—is key to financial security. But remember that your asset allocation changes all the time, depending on how the different slices of your portfolio are faring. So take the time to rebalance the portfolio every year, to ensure that you haven't strayed too far from your ideal allocation. | |
Use this rule of thumb: Multiply your salary by seven. But don't forget about your other assets—they don't go into the ground with you. Tally up your 401(k), IRA, plus any life-insurance policies provided by your employer, and toss in Social Security, which kicks in for your children and spouse immediately upon your death. If you think you need a $700,000 policy and those assets add up to $200,000, you can probably make do with a $500,000 life-insurance policy. | |
About half of the world's stock-market value is based abroad. But you wouldn't know it by looking at Americans' portfolios. Most people have far too little invested internationally, according to Roger Ibbotson, chairman of Ibbotson Associates. Hike your global allocation (look at Europe, parts of Asia, and Australia) to spread your risk and to benefit from rising economies around the world. |
Posted by The Correspondent
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