Financial advice if you’re starting a family late in life

One of the biggest demographic shifts in the U.S. recently is that many people are waiting until later in life to start a family. According to the CDC, the birth rate for women ages 30-44 has been rising steadily for the past several years, with the largest and most consistent increases among women ages 40-44.

Though starting a family can be a joyous occasion, a new baby can have much bigger financial implications on people in their late 30s and 40s than it can for younger parents. After all, if you’re starting a family at a later age, you’re taking on new responsibilities—and some major new expenses—just as you’re hitting your peak earning years, and when you have a limited time period before retirement. The good news is that you’re likely to be more established in your career, with more disposable income. Yet if you want to take time off when your kids are young, this will have a larger impact on your career path, retirement savings, contributions to Social Security, and other factors.


As a result, older parents with young children need to plan their financial lives carefully. Here are a few considerations to keep in mind. Note that these are complex issues, and often require that you sit down with a financial advisor to talk through the various options. For financial planning help for parents of all ages see Taking care of your quarter-million dollar baby .


Insurance for starting a family


Be sure your family is protected from any disruptions to your income, starting with life insurance. Because you’re older, there’s a statistically greater likelihood that you and/or your spouse may not be around until your children are financially independent. Your prior policy—which likely only covered your surviving spouse—will likely not be enough.


The right amount of coverage varies from one family to the next, but in general, a life insurance policy should cover several years of your salary, plus enough to pay off all debts (including a mortgage), and cover some child-care expenses (including college). You can learn some basics about the different types of policies, along with a calculator to estimate prices, here .


Finally, make sure you have some kind of disability insurance, along with long-term care for when you get older. (Long-term care policies pay for ongoing medical care, when people need help with routine activities like bathing, dressing, and cooking.) Many jobs offer these policies as a part of their benefits package—for parents, the decision to enroll should be automatic. If you’re self-employed, the stakes are even greater. An accident that leaves you unable to work could become a financial catastrophe for your family. Regarding long-term care, it’s possible that your greatest healthcare needs, and expenses, could come before your kids are even in the workforce. To avoid being a burden on them, you’ll need to set up the right policies today.


Have an estate plan in place

Next, make sure you have a clear estate plan in place. That means a will that stipulates guardians for your children and how your assets are to be distributed if something should happen to you. Because your children may be too young to take over the assets directly, you should consider setting up a trust in their name, and designating a responsible person (may be a different person than the guardian) to oversee the trust until they come of age.

Incapacity planning is another factor. In the event you can’t take care of your kids, because of an illness or accident, you’ll need to identify the person who can serve as their guardian. If you don’t, a judge will make the decision for you. (You’ll likely want to get some help from a financial advisor or lawyer when setting up your estate plan.)

Save money for retirement

Perhaps the biggest challenge with having children later in life is saving money for two big goals—their college and your retirement—at the same time. You’ll need to reprioritize your savings plan to make sure you’re focusing on the right objectives.

Though there are no universally applicable guidelines, in general, you should make your retirement savings the number-one priority. You can borrow for other expenses (to buy a home, to pay for your daughter’s college tuition), but you can’t borrow money for retirement. As the saying goes, pay yourself first.

In addition, retirement assets generally don’t get counted against families in determining financial aid for college tuition. (Virtually all U.S. schools calculate aid through a standard federal form called the Free Application for Federal Student Aid.) As a result, more money in your retirement account can be a benefit, in that your child may qualify for more assistance. If necessary, you may be able to access some of your retirement assets to help with college costs.

Paying for College

That said, while retirement accounts can help you save for college, they’re not explicitly designed for that purpose. A better option for some families is a 529 plan, which let you save for a family member’s education. The earnings grow tax-free, and many states also let residents deduct their contributions against income, giving them a break on their state tax bill. (You can find out more on 529 plans here. )

It’s worth noting that this need not be an either/or decision—many parents opt to max out their retirement contribution first, and then save whatever else they can through a 529 account as well.

The Big Picture

With proper planning, you can start a family later in life and still reach your financial goals. With deliberate planning, clear priorities, and some help from a TIAA-CREF financial advisor, you can take care of your children financially while making sure you have a sound plan to take care of yourself and your spouse as well.