Make the Most of Mid-Life Financial Planning

In all likelihood, outside of this 10- to 20-year window you'll never take home as much pay again. Don't make the error of assuming that your current earnings will remain constant, and take the following steps to ensure you have a plan in place that should help keep your portfolio on track.

Organize your portfolio. Allocate your portfolio among the major asset classes of equities, fixed-income securities, and cash equivalents based on your goals, your tolerance for risk, and your time horizons.

Generally speaking, the larger the equity portion of your portfolio, the greater the potential for growth and the greater amount of risk. The more fixed-income securities you include, the greater the potential for income and preservation of principle. Fixed-income investments are guaranteed by the issuer as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

Most importantly, you may need to periodically rebalance your portfolio in order to remain consistent with your original allocation, or modify it as you come closer to realizing your goals.

Don't overlook tax planning. If you are in your late 30s to late 50s, chances are good that your income-tax bracket is higher during this period than in your early years, or when you retire.

Consider maximizing pretax contributions to your employer-sponsored retirement plan or making deductible contributions to an IRA (if you're eligible) to help reduce current income while providing tax-deferred savings opportunities.

Also, keep in mind that short-term capital gains are taxed as income, while long-term capital gains and dividends are taxed at lower rates. And don't underestimate the potential benefit of including tax-exempt bonds in your portfolio.*

Protect what you've accomplished. As your wealth continues to increase, it's important to preserve what you've accumulated and safeguard your future. That's why estate planning and life insurance are two of the cornerstones of a sound financial plan.

A qualified legal professional can help you implement an estate plan that is best for your situation, or review an existing plan to ensure it is still consistent with your goals. Also, be sure you have enough life insurance in place to help cover any liabilities--such as your mortgage--and protect your family's financial future.

Ultimately, mid-life shouldn't be a time of crisis from a financial perspective. Instead, it's a time to take advantage of some of your most productive years. By acting on these simple pointers, you may be in a better position to enjoy the fruits of your labor for the long run.

*Some tax-exempt investments may be subject to the federal alternative minimum tax, as well as federal or state capital gains taxes.

Doug Lockwood, CFP is a Partner at Harbor Lights Financial Group, a full service wealth-management team that has been dedicated to assisting clients in the accumulation and preservation of their wealth for over eighteen years. He was recently named one of America's Top 100 Financial Advisors by Registered Rep Magazine (August 2010) based on assets under management.