Young Professionals – Establishing Healthy Investing Habits

Meet Megan:  Like most younger professionals we work with, Megan was unsure how to get started.  She’s in her early 30’s, single (for now) and fairly stable in her career, although may change employers.  Megan had a couple of previous company retirement accounts and a Roth IRA she started years ago.  She had accumulated a sizable bank account but unsure how to invest, especially after seeing her parents having mixed success.

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.

Our recommendations for Megan combined several ideas that cumulatively have made a significant impact: 

  • She modestly increased her retirement contributions, to better fund the primary goal, retirement. (A 2% increase for someone earning $100K typically lowers bi-weekly take-home by about $50)
  • We allocated her investable cash into two strategic accounts.  The first for growth, seeking appreciation over the 5-10 years it might be before settling down.  Then, a moderate account seeking 4% to 5% returns for 3-5 years for the amount beyond her “safety net” for unexpected expenses.
  • We started Systematic Investmentswith her “safety net” in place, Megan adds $100/month to her moderate account and is now comfortable making the monthly maximum (currently $458) to her Roth IRA. Besides tax-free growth, once you’ve owned a Roth for five years, you can withdraw up to $10K for a first-time home purchase!
  • We consolidated her former company plans and helped allocate her current 401(k).  So now all her retirement investments complement each other, and she has a track for her retirement plan.

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