Fall is here — where did summer go? Time now to help kids with homework, rake leaves and other rites of autumn. Just as your day-to-day tasks change with the seasons, so will your money management and investment activities at different phases of life.
Phase one: Planning for possibilities. When you’re young and starting out in the working world, your immediate financial concerns may be to pay off student loans and possibly save for a house. To address both these goals, you’ll need to budget. Even at this stage of life, think about saving for retirement — because time is your biggest ally. If you work for an employer who offers a retirement plan, such as a 401(k), contribute what you can. At least put in enough to earn your company’s matching contribution. You may want to open an Individual Retirement Account (IRA).
Phase two: Gearing up for other goals. As you move through life, possibly begin a family, you’ll develop other financial goals, such as helping children pay for college. Consider investing in a tax-advantaged college savings vehicle, such as a 529 plan. Also, it’s important to have enough life insurance to protect your family.
Phase three: Ramping up for retirement. When you reach the mid-to-later stages of your working life, you may find more financial resources available, as your earnings may have increased, your children have grown and your mortgage may be paid off. “Max out” on your 401(k) and IRA. If you still have money available to invest, look for other tax-advantaged retirement vehicles.
Phase four: Reaping the rewards. Time to enjoy the results of your hard work and many years of saving and investing. You may need to tap into your retirement accounts, so choose a sustainable annual withdrawal rate. The amount you withdraw each year from your IRA and 401(k) depends on a variety of factors: how much you’ve saved, the lifestyle you’ve chosen, your estimated longevity, how much you have available from other sources, and so on.
Phase five: Examining your estate plans. During your retirement years, if not sooner, review your estate plans so you can leave the legacy you desire. If you need to create or update legal documents, such as a living trust and durable power of attorney, consider consulting a qualified estate-planning attorney.
Make appropriate financial and investment decisions at many different times over the years. With diligence and discipline, you can discover the paths to take as you move through the seasons of your life.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
Information from Edward Jones, provided by Jim Talley, financial advisor at Edward Jones, 2703 Beaver Ave., 279-4179.