Investing for the Times of Your Life
Time and Risk Tolerance
After 20 years in the financial services industry, I am so proud of the progress we women have made in gaining control over our financial destiny. During these tumultuous times, stressing over money and deciding what to do with savings is enough to make anyone cave in to stress. It's precisely at times like this that I always remind myself and my clients to go back to basics. Here are some tips I hope will help you all.
Where ever you are in your financial life cycle—starting a career, getting married, buying a home, raising a family, funding a child’s education or planning for a comfortable retirement—to be successful, you need to develop and maintain a disciplined approach to saving. Once a regular savings routine has been established, the next step is to decide how to invest the money you are saving. This decision will depend on many factors, including the intended use for the money, the time frame for when you’ll need the money and your comfort level with investment risk.
Low Moderate Aggressive
Stocks 30% 60% 80%
Bonds 50% 30% 10%
Cash 20% 10% 10%
Total 100% 100% 100%
This table illustrates hypothetical portfolio asset allocations for investors with the following risk profiles:
• Low Risk—retirees or those nearing retirement
• Moderate Risk—middle-aged investors
• Aggressive Risk—younger investors
These allocations are presented only as examples and are not intended as investment advice. Please consult a financial advisor if you have any questions about how these examples apply to your situation.
Investing for Life’s Stages
Although each individual’s attitude toward investing is different, most investors share some common situations throughout their lives. For instance, where you are in your life cycle certainly affects how you invest for retirement.
Following are some major life events that most of us share, and some investment moves that you may want to consider:
When you get your first “real” job:
• Start a savings account to build a cash reserve.
• Start a retirement fund and make regular monthly contributions, no matter how small.
When you get a raise:
• Increase your contribution to your company-sponsored retirement plan.
• Increase your cash reserves.
When you get married:
• Determine your new investment contributions and allocations, taking into account your combined income and expenses.
When you want to buy your first house:
• Invest some of your non-retirement savings in a short-term investment specifically for funding your down payment, closing and moving costs.
When you have a baby:
• Increase your cash reserves.
• Increase your life insurance.
• Start a college fund.
When you change jobs:
• Review your investment strategy and asset allocation to accommodate a new salary and a different benefits package.
• Consider your distribution options for your company’s retirement savings or pension plan. You may want to roll over money into a new plan or IRA (restrictions, limitations and fees may apply).
When your children have moved out of the house:
• Boost your retirement savings contributions.
When you reach 55 years of age:
• Review your retirement fund asset allocation to accommodate the shorter time frame for your investments.
• Continue saving for retirement.
When you retire:
• Carefully study the options you may have for taking money from your company retirement plan. Discuss your alternatives with your financial consultant.
• Review your potential income after retirement and reallocate your investments to provide the income you need.
Discipline and a Financial Consultant Can Help
One of the most difficult things about investing is disciplining yourself to save an appropriate portion of your income regularly so that you can pursue your investment goals. And if you’re not fascinated with investing, it’s probably also hard to force yourself to review your financial situation and investment strategy on a regular basis. Establishing a relationship with a trusted financial advisor can go a long way toward helping you practice smart money management over your entire lifetime.
Hope this helped.
This article was prepared by Standard & Poor’s and is not intended to provide specific investment or tax advice for any individual. Consult your financial advisor, your tax advisor or me if you have any questions.
All user-generated information on this site is the opinion of its author only and is not a substitute for medical advice or treatment for any medical conditions. Members and guests are responsible for their own posts and the potential consequences of those posts detailed in our Terms of Service.