Mid-Career Financial Planning Considerations

Published 03/16/2021

By Joey Schultz


On one hand, it is never too late to get one’s financial house in order. On the other, there is no such thing as having a plan in place too early. Just as with investing, good financial planning habits have more time to compound the earlier you start.


The truth is that the value of prudent financial planning can and should begin well before reaching retirement. Diversification, thoughtful portfolio allocation and tax efficiency are important no matter your life stage, but perhaps the most significant period for retirees (i.e., your future self) are those middle-of-career years between the ages of 30 and 55. Decisions that investors make during this period will have the greatest influence on the long-term financial health and lifestyle they experience in retirement.


Though every client situation is unique, the following is a non-exhaustive list of financial and non-financial planning topics we often see as having the greatest impact for our middle-of-career clients.

Big-Picture Questions

It is not uncommon for us to coach clients through a combination of life- and wealth-changing events during their middle-of-career years. The following topics and underlying questions are written from an investor’s viewpoint to encourage dialogue with your financial advisor.


Switching Careers or Starting Your Own Business 

  1. How will switching jobs or taking the leap into entrepreneurship change my income, benefits and even lifestyle/daily routines? 
  2. Do I need to make changes to my budget/savings plan? 
  3. How do I evaluate the capital needs for my startup? 
  4. Should I increase my emergency fund? 
  5. What impact will my new benefits plan have on my wealth? 

Considering Whether to Rent or Buy

  1. When does it make good financial sense not to own? 
  2. How much house can I afford to buy?

Preparing for the Birth or Adoption of a Child 

  1. How should I budget and adjust savings priorities when growing a family? 
  2. Does it make sense to open a 529 college savings plan right away?

Saving for College With a 529 Plan

  1. What should I consider when saving for college
  2. What 529 plan should I open? 
  3. How should my investment allocation in this account differ from my retirement accounts? 
  4. What is the proper amount of funding? 

Mortgage Financing

  1. When does it make sense to refinance? 
  2. Should I pay points in exchange for a lower interest rate? 
  3. Should I take equity out of my home? 
  4. Which one should I choose: 15-year or 30-year amortization?


Changes in your long-term plan do not have to be scary. In fact, most of these topics signal a cause for celebration. When you understand how common life changes may impact your long-term financial projections, you can find new clarity and confidence.

Annual Goals and Savings Prioritization

Every financial plan should incorporate a yearly savings goal based on your current income, expenses and ability to save. Along with automation, evaluating and agreeing on a savings target with a financial advisor can help maintain discipline to the plan, increasing the likelihood of achieving your goals for retirement. 

Just as important as setting aside assets to sustain income needs in retirement, prioritizing savings properly (the where, why and how) can have a huge impact on your long-term after-tax wealth. 


Sometimes, it helps to think of prioritization like a waterfall cascading into a series of pools. Once a goal has been established, the critical question becomes this: Which pool should I fill up first, second, third and thereafter?

In addition to the more ubiquitous brokerage and 401(k) accounts, there are many pools to consider in prioritizing where to build pre-retirement wealth, many of which carry surprising post-retirement advantages. 

Note: The following list does not represent a universal rank order prioritization. Every client situation is unique. However, an understanding of the answers to these questions and how these types of accounts (and others) fit a savings plan can have a huge impact on an investor’s after-tax wealth 20 years down the road. 

·        401(k) — Typically, saving to workplace retirement accounts is the top priority for most middle-career savers. Despite an increase in access and ease of setup over the past decade, there are still a lot of critical decisions to consider when putting money into a 401(k).

  1. Should I make pretax contributions? 
  2. Should I make Roth 401(k) contributions?
  3. Or a combination thereof?
  4. Do I select the prescribed target date fund or build my own portfolio of individual investment options?

One thing is certain: At the very least you should make sure you are maximizing any 401(k) match (i.e., free money) offered by your employer.

·        Roth IRA or Backdoor Roth IRA* — In certain situations, clients that otherwise earn too much income to qualify for direct Roth IRA contributions can still make backdoor Roth IRA contributions. To avoid messy pro-rata taxation rules that ultimately diminish the tax advantages of the backdoor Roth, a requisite for pulling off this properly is ensuring the absence of any pretax IRAs for the account owner. This is another reason why speaking with an advisor about what to do with your old 401(k)s can be beneficial.

·        Health Savings Account (HSA) — Individuals and families enrolled in a high deductible health plan are eligible to make HSA contributions (and possibly get free employer contributions), and thus have access to an incredibly powerful savings and investment tool to boost their financial security.

·        Employee Stock Purchase Plan (ESPP) — If your employer offers an ESPP, you may be eligible to purchase company shares at a discount, often 5% to 15%, off the fair market value. When managed correctly, participation in an ESPP plan can boost your income and net worth.

·        Mega Backdoor Roth — For those whose company-sponsored 401(k) plan or 403(b) plan meet two key conditions, a mega backdoor Roth could allow additional savings each year (up to $38,500) in highly tax-advantaged Roth assets beyond the normal employee contribution limit of $19,500. Because direct and backdoor Roth IRA contributions are limited each year ($6,000 for 2021, or $7,000 if over age 50), the mega backdoor Roth may potentially be more lucrative.

·        Brokerage Account — Taxable brokerage accounts are typically the last pool to be filled; however, this pool plays an important role in optimizing client portfolios as its unique tax characteristics allow for more efficient asset location.

*Using a Roth: Roth assets carry incredible tax benefits, including tax-free growth on your assets forever. Unlike assets invested in a brokerage account, which are subject to capital gains taxation, and unlike qualified pre-tax contributions to a 401(k) or IRA, which are subject to ordinary income tax rates upon withdrawal, both investment gains and qualified distributions from Roth accounts are tax free. Assuming an investor can contribute $30,000 each year to Roth accounts, the savings is more than $20,000 in capital gains (if invested in a brokerage account) over a 30-year period for each year that level of contribution is made.

Understanding the Relationship Between Risk and Expected Return

As an investor, you should start with an understanding of your personal risk tolerance as a foundational input to productive long-term investing. We often define a client’s risk tolerance along three dimensions as follows:

·        Willingness: A client’s willingness to take risk can be difficult to assess, as it is a more subjective measurement of an investor’s behavioral and emotional response toward investing and the inherent unpredictability of markets. This is the dimension that explores the question, “Can I sleep soundly at night with this portfolio?”

·        Ability: A client’s ability to take risk can more easily be gauged via quantitative assessment. A greater ability to tolerate risk is often associated with longer investment horizons, greater job stability, higher income and higher existing asset balances. This dimension evaluates an investor’s level of insulation from market uncertainty. 

·        Need: In some instances, need is layered into the assessment and is based on the rate of return a client would need to achieve to reach their financial goals. This dimension is rarely relevant for investors in the middle of their careers because, typically, the amount of time between now and when the assets will be drawn upon to sustain spending in retirement is lengthier than a retiree’s. Changes in earning potential, spending habits and life circumstances tend to be more relevant drivers of risk tolerance than “need” for investors in the accumulation phase of their career.


As your willingness, ability and need to take risk evolves, so too will your risk tolerance. Knowing when and why it may make sense to adjust your portfolio allocation accordingly can lead to a better investment experience.


From there, it is well known that one of the core tenets of any proper long-term investment strategy is diversification. As a matter of fact, diversification drives higher expected returns, not just less risk. Once your objective is defined as achieving some long-term outcome as opposed to beating the market in the short-term, that understanding of risk takes on a whole new perspective.

Having a plan and working with a financial advisor can help you remain focused on controlling what you can control. After all, markets are unpredictable. 


Here are a few examples of the right things to focus on:

·        Is my portfolio appropriately diversified?

·        Are the investments in my portfolio low cost, or are they detracting from my investment returns?
(typically a blended/average fund expense ratio under 0.30% is considered low cost)

·        Am I leveraging the best of academic and empirical evidence to guide my investment decisions (not what my gut is telling me)?

·        Am I remaining disciplined to my plan?

·        Are the assets outside my main portfolio, such as 401(k)s, aligned with my risk tolerance and asset allocation objectives?

Tying Up Loose Ends: Additional 401(k) Considerations

You can improve your long-term, after-tax returns by making sure your entire investment portfolio is being managed holistically from brokerage accounts to 401(k)s to IRAs. In addition to aligning your 401(k) assets with your broader portfolio, there a host of additional considerations you should give to your 401(k)s as you progress from early through middle to late in your career.


Have You Consolidated All Your Old 401(k)s? 
On the surface, this may seem like a trifle organizational task. However, your future self will thank you for ensuring you do not someday have a trail of old retirement accounts to keep track of. 

·        Are You Rebalancing Your 401(k)s?
The two primary benefits of portfolio rebalancing are: 1) to maintain the long-term risk profile of the portfolio and 2) to add expected return by buying low and selling high. In short, rebalancing helps reduce portfolio volatility aiming to increase long-term wealth by systematically taking advantage of the inherent randomness and unpredictability of markets. If your 401(k) does not offer automatic rebalancing, you should be resetting the allocation of your current investments once or twice a year. Remember, there is no tax impact to moving around your 401(k) or IRA investments.

·        What If You Are Self-Employed or Your Company Does Not Offer a 401(k)?
Self-employed individuals, small business owners, sole proprietors and W-2 employees who find themselves in this situation have more tax-advantaged savings options than they might think. The universe of options is both vast and nuanced with traditional IRAs, SEP IRAs, SIMPLE IRAs and solo 401(k)s. Make sure you talk with a financial advisor to determine which vehicle will get you the best bang for your investment buck based on your situation.

Other Wealth-Related Topics

Last but not least, two of the most critical planning items we examine with clients at all stages of life are life insurance and estate planning. While not easy to contemplate, if you have not yet, now is a good time to incorporate them into your planning discussions.

·        Life Insurance — We help families and individuals determine whether their loved ones are adequately taken care of and the implications on wealth and legacy if the unthinkable were to happen.

·        Estate Planning — At a minimum, anyone who owns real and/or financial assets should have a basic will and medical power of attorney in place (and up to date). You should speak with your financial advisor and/or attorney for guidance and assistance in considering and preparing these important documents. The need for certain estate planning elements is as much a factor of where you live and your personal situation as it is about the size of your estate, so it is advisable to speak with a professional before starting an estate plan. Once you have completed these documents, make sure to send copies to the people in your life who need to know, including your financial advisor.


Hopefully, this article serves as a helpful guide to some of the planning-related topics that can impact families and individuals long before you reach retirement. Having a long-term financial plan is an important first step that can reduce stress and help facilitate a stable transition from middle career on to retirement. Many of these topics boil down to optimization and implementing mechanisms that nudge you toward regularly reassessing that plan and all of its moving parts. Speaking with a financial advisor can help you adjust and adapt, helping you achieve long-term financial well-being.