Retirement is closer than you think–are you preparing for it?
As an Investment Advisor Representative, I work with a wide array of clientele. It’s true, value systems tend to differ based on the age and the risk tolerance of my clients. When it comes to setting financial goals, no two households are exactly the same.
I find millennials to be especially reluctant to talk about short and long-term financial goals. For many millennials, the idea of saving, investing, or owning real estate seems entirely out of reach. And others would rather enjoy their money now, investing in “experiences” like travel or cooking classes, to name a few.
Regardless of your personal values, I do have a few recommendations that I’ve found are easy to implement.
Start a S.W.A.N. fund.
S.W.A.N. stands for “sleep well at night,” and a S.W.A.N. fund can help you to rest easier, knowing you have enough money saved, over time, to handle an emergency. Once you cover your housing and related maintenance expenses, a good rule of thumb is setting aside between three and six months of basic living expenses. Setting aside a minimum of ten percent of your after-tax monthly income can make a huge difference when you’re asked to deal with unforeseen expenses like the ones that surprised many during the 2020 pandemic. My recommendation? Set up your direct deposit so a portion of your income goes directly to this fund. Then only use it in case of an emergency, like a home repair or an unexpected medical expense.
Commit To Investments
Investing isn’t just for people earning six-figure incomes. Apps like Acorns allow investors to round up purchases to the next dollar. The app then invests that “spare change” when purchases are made with a credit or debit card linked to the account. As an example, if you buy groceries for $25.45, Acorns will automatically round up $.55 and invest it in funds that match your investment risk-return profile. Investing spare change can really add up over time.
Ready, Set – Begin Visualizing Your Financial Goals.
As I mentioned earlier, everyone’s financial goals are unique. In addition to funding retirement, some of my clients want to make sure they have money to send their kids to college. Others want to fund an annual vacation. The important thing to keep in mind is that these goals require a plan, one that involves a disciplined strategy combined with living within your means and saving.
Open Two Investment Accounts.
Once you know what you’re saving for, it’ll be easier to put that money aside. I suggest opening two accounts–one that’s taxable and one that’s strictly for retirement. The money you put into your non-taxable account, such as a traditional IRA, can’t be withdrawn (without a 10 percent penalty) until you are age 59 ½ (there are exceptions to the early withdrawal penalty, such as a first-time home purchase, qualified college expenses, and qualified birth or adoption expenses, each with limitations). On the other hand, your taxable investment account is readily accessible. This is the money that, if invested using a disciplined approach, can help towards meeting your financial goals.
Regardless of your age (including Gen X, Y and Z), it’s important to be intentional with your resources–starting now!
Let’s chat.
A.G.P. / Alliance Global Partners and its representatives do not provide tax advice. The discussion of tax matters in this material is interpretation of current tax law and is not intended as tax advice. You should consult a tax professional for information relating to your particular situation.