Smartest Money Moves at Any Age

From first job to retirement, we tell you how to manage a dozen events that can change your life.

From Kiplinger's Personal Finance magazine, July 2005
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Survive and thrive if you lose your job

Layoffs were nothing new to Jim Logan. As director of labor and human relations for a major specialty-chemical company, he was accustomed to being the bearer of bad news. "But I was always sitting on the other side of the table," says Logan. Then in February, the company president told Logan his position was being eliminated. "It was a weird feeling," Logan recalls.

But after 24 years in human relations, Logan, 57, knew exactly how to handle the shock. For starters, the company picked up most of the tab for his group-health-insurance coverage for 18 months under the federal COBRA law. "Don't even walk out the door until you have COBRA protection," advises Ben Baldwin, a financial planner in Arlington Heights, Ill.

LIFE EVENT | Job loss
1. Speak up. Negotiate as big a severance package as you can.
2. Pick up the tab for your group health insurance for 18 months under the federal COBRA law.
3. Consider selling stocks in your taxable accounts to raise cash if you need it.
4. Think positive and consider turning a job loss into a career change.

Logan also negotiated an attractive severance package. Employers are often flexible about offering such a deal, especially if they can avoid bad publicity by having you leave on good terms.

If you have an inkling that a layoff is imminent, you'll rest easier if you build up a cash emergency fund to tide you over for several months. Or apply for a home-equity line of credit before you leave your job, when you're more likely to qualify.

If your layoff is unexpected and you don't have the cash, consider selling stocks or bonds in your taxable accounts. This is the rainy day you've been saving for. But don't raid your retirement savings. And cut back on spending rather than run up credit-card debt.

LIFE EVENT | Reentering the work force
1. Polish your skills. Your command of technology may be rusty.
2. Don't underestimate what you have to offer. Staying home to take care of children and manage a household requires as many talents as a paying job.
3. Don't expect to pick up where you left off. Choose a job based on its potential for advancement rather than starting salary.

Be positive. "You can take advantage of a job loss and make it into a life change," says Kevin Shahan, a financial planner in Tulsa, Okla. Shahan recommends the book Unique Ability: Creating the Life You Want, by Catherine Nomura, Julia Waller and Shannon Waller (The Strategic Coach, $35). To find a career counselor, visit the National Career Development Association.

Logan's former employer is paying for him to work with an outplacement firm. He wants to stay in human resources and remain in Atlanta, where he and his wife, Elaine, who sells real estate, settled in 1976.

Meanwhile, Logan continues to jog every day and has made looking for a new position his full-time job. "I'm staying optimistic," he says. "Layoffs are a fact of life." -- Steven T. Goldberg

LATE BLOOMERS | Saving for retirement when you're 40

Whether you're reentering the work force after a long hiatus or trying to catch up on saving for retirement, don't despair. It's never too late to save, and at age 40 you still have 27 years to build a nest egg. -- Steven T. Goldberg

Make saving a priority Set a goal Join your employer's 401(k) plan Max out your contributions Open a Roth IRA Invest aggressively
"It's easy to think of your income as found money," says Donna Harrington, a financial planner who returned to work after raising her children. "I wish I had been more frugal." Knowing how much you need for retirement helps you draw up a blueprint for saving. One place to start is the retirement-planning section at T. Rowe Price or our retirement calculator. If your combined federal and state income-tax rate is 30%, every dollar you invest in a 401(k) cost you only 70 cents in forgone income. And that's before you factor in an employer match. In 2005 you can sock as much as $14,000 into a 401(k). If you'll be 50 or older by the end of the year, you can kick in another $4,000. Assuming an annualized return of 10%, investing $14,0000 a year for 27 years will build a fund of nearly $2 million. As long as you meet income requirements, you can contribute up to $4,000 of earned income to a Roth in 2005, or $4,500 if you're 50 or over, and withdrawals will be tax-free in retirement. With decades to go before you retire, it's not unreasonable to shovel almost all your retirement money into stock funds. Since 1926, stocks have returned more than 10% annually; on average, bonds have returned only about half that.

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