Meet Megan. She’s in her early 30s, single (for now) 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.
Our conversations determined that she was living within her means, needed a cash “safety net” (for unexpected car repairs or job search) and besides retirement hopes one day to start a family and own a home.
- A modest increase to her retirement contributions, to better fund her primary goal, retirement. A 2% increase for someone earning $100K typically lowers bi-weekly take-home by about $50
- Set aside a “safety net” savings account for unexpected expenses
- Allocate her remaining cash into two strategic accounts. First, a moderate account seeking 4% to 5% returns for goals in the next 3-5 years. Then, a growth account seeking appreciation over the 5-10 years it might be before settling down
- Consolidate her former company plans
- With her “safety net” in place, Megan started an automatic bank draft of $100/month to her moderate account and is comfortable making the monthly maximum (currently $500) to her 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, her retirement investments complement each other, and she has a track to meet her primary goal