Young Professionals: Establish Healthy Investing Habits

by | Case Studies, Integras Insights, Young Professionals | 0 comments

Meet Megan. She’s in her early 30s, single, and fairly stable in her career, although she may change employers.

Like most younger professionals we work with, Megan was unsure how to get started. She had a couple of previous company retirement accounts and a Roth IRA she started years ago. She had accumulated a sizable bank account but was unsure how to invest, especially after seeing her parents experience mixed results.

Integras Analysis

Our conversations determined that she was living within her means, but she needed a cash safety net (for unexpected events such as car repairs or job loss). She hopes one day to start a family and own a home. She contributes to her 401(k) but was unsure if she was contributing enough.

Recommendations

  • Put some of the excess cash in her bank account into a high-yield savings account for emergency / unexpected expenses
  • Allocate her remaining excess cash into two strategic accounts. First, a moderate account seeking 4% to 5% returns for goals in the next 3-5 years, such as purchasing a home. Then, a growth account seeking appreciation for longer-term goals before retirement age.
  • A modest increase to her 401(k), to better pave the path to future retirement. A 2% increase for someone earning $100K typically only lowers bi-weekly take-home pay by about $50.
  • Open a Roth IRA
  • Consolidate her former company plans to ensure she’s not losing track of these investments.

Results

With her “safety net” in place, Megan started an automatic bank draft of $100/month to her moderate account and is comfortable making monthly contributions to the Roth IRA. Besides tax-free growth, once you’ve owned a Roth for five years you can withdraw up to $10,000 without penalty towards a first-time home purchase! We consolidated her former company plans and helped allocate her current employer’s 401(k). Now, Megan’s retirement investments complement each other, and she has a track to meet her future retirement goal.

You might also like…

Tax Deferred Exchanges with UPREIT Programs

Tax Deferred Exchanges with UPREIT Programs

If you sell an investment property like a rental home or other piece of commercial real estate, you will owe taxes on the gain. Between capital gains tax and depreciation recapture, a taxpayer could pay more than 1/3 of their gain in taxes. Many investors turn to DST...

read more
Deferring Tax on the Sale of Investment Property

Deferring Tax on the Sale of Investment Property

If you sell an investment property like a rental home or other piece of commercial real estate, you will owe taxes on the gain. Between capital gains tax and depreciation recapture, a taxpayer could pay more than 1/3 of their gain in taxes. Many people aren’t aware...

read more