Act Your Age | Money & Investing | Hudson Valley | Chronogram Magazine

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Act Your Age

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Last Updated: 08/13/2013 3:31 pm
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30-40
Hone investments.
When you begin placing money in different investment categories like equities, bonds, and money market accounts, an advisor will help create an asset allocation model for you. This model illustrates your investments and should represent your goals and risk tolerance. Pilz explains that it’s critical to review your asset allocation on a regular basis to make sure it’s still meeting your needs. “We monitor that consistently,” she says. “People’s lives change, what is applicable to you today might not be next year.”

With the uncertain future of Social Security and many employers doing away with pension plans, Mannato strongly encourages clients to take advantage of 401K plans or, if unavailable or a client is self-employed, IRAs. He says an ideal amount to save to a 401K is six percent of your income, because many companies will match that. “Increase savings gradually each year so if you start at six percent, let’s strive to raise that by one percent the next year, and one percent the following year,” Mannato suggests. “Then you can budget that into your money system so that it’s not that big of a hit. Savings into a 401K plan is either going to make or break someone who wants to be able to retire at a reasonable age.” Another option is the IRA, or individual retirement account, which is a personal savings plan that offers tax benefits. Roth IRAs are similar but grow tax-free without a tax deduction for contribution, while regular IRAs grow tax-deferred but contributions are tax-deductible. Speak to an advisor to establish the best method for you. “It depends what your employment status is, what your tax bracket is, which could be good for you in terms of tax savings,” Mannato says.

Prepare for large expenses.
Mannato says at this point multiple things are happening in people’s lives: They want to buy a house, they’re having children, and want to make sure they’re saving enough for these events. In terms of home buying, Mannato stresses the importance of good savings habits and offers services that help clients budget their money according to when they want to purchase a home and how much money they want to put down. If your plan to buy a house is more short-term, which would be less than two years, Pilz recommends certain types of accounts. “You’d want to look for CD [certificate of deposit] or money market funds that have good rates to put your money aside for the house,” she says.

When couples start having children, Mannato urges clients to set up college savings accounts as early as possible. “The cost of education goes up more and more each year, and the longer you wait, the more you’re going to get behind the eight ball,” he says. Pilz recommends parents start investing in a growth fund, which is a mutual fund that appreciates based on investments in the growth stocks of burgeoning companies. “Let’s say you could only afford to put $50 a month in,” she says. “You could open an account for the baby, send money to a mutual fund every month for a number of years and you’ll be surprised how quickly that money could grow.” Mannato says there are a number of investment vehicles available for college savings, like the 529 educational plan, which offers special tax benefits. Sitting down with an advisor can help determine a client’s savings potential and provide direction toward the best plan.

Mannato also emphasizes the importance of estate planning for couples who have just purchased a home and have started a family. “If anything happens to the parents and both of them pass away, who’s going to take care of the upbringing of the children? Who’s going to handle the financial matters pertaining to the children?,” he asks. “There are a lot of individuals that don’t think of this because they’re concerned about the next paycheck, the next bill. My role is more of an educator and planner more than anything.” An advisor can help figure out the financial aspects of estate planning, and even refer you to an attorney who can help with other portions like health care proxy and successor/custodian orders.

40-50
Take advantage of peak earning years and continue saving.
Mannato says in this pre-retirement phase, people are making the most income and should keep increasing savings geared toward retirement. “We’re continuing to save or increase savings to their 401K or any savings plan that’s going to help them toward retirement, which may only be 12 years away if they’re 50 and want to retire at age 62,” he says. Remain creative with savings strategies. “If you and a person go out to dinner and it’s buy one/get one, and if you’re going to spend $20 each and you save $20,” Mannato says, “you were going to spend that $20 anyway. Just bank it now.” Try saving spare change or stashing away dollar bills, which will quickly add up without noticeable detractions from your wallet.

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