Life Stage Planning - Mile Marker #3: REVIEW YOUR PLAN

Mile Marker #3:
Review your plan.

With retirement around the corner, start your retirement distribution planning in an effort to maximize income from your retirement plans and minimize your tax burden. Consider rolling over your employer's retirement distribution into an IRA to maintain tax-deferral benefits and postpone paying taxes to future years when your taxable income may be less. Estate planning also offers opportunities to pass your hard-earned assets to your loved ones instead of Uncle Sam.
Regardless of which life stage you're at, it is never too late to start or adjust your financial plan.

Life Stage Planning – Mile Marker #2: ADJUST YOUR PLAN

Mile marker #2:
Adjust your plan

During your 40s and 50s, you may be in the peak earning years of your career. This is the time to maximize your retirement contributions and make the most of savings opportunities offered by Uncle Sam. What if you have maxed out your IRA contribution and employer-sponsored plan? Take a look at annuities, which have no contribution limits and offer tax-deferral advantages.

Make sure that you diversify your investments. Never put all of your investments into one category. Spreading the money over different asset classifications reduces risk while helping to maintain overall performance. Don’t try to “time” your long-term investments. Professionals find it difficult to figure out exactly when to buy low and sell high. Don’t jump in and out of investments in reaction to the latest headline or stock quote. Invest regularly and for the long term. The value of some investments, particularly stocks and bonds, fluctuates in the short term. Over the long term, however, they usually gain in value.

Life Stage Planning – Mile Marker #1: ESTABLISHING YOUR PLAN

Mile marker #1: Establishing your plan.

Buying a first home, starting and supporting a family, paying off debt—if you are in your 20s or 30s, your financial obligations may seem larger than your income. But here's the good news! You're in the best position to put the power of compounding to work for you.

The best way to free up money to invest is to get a grip on spending. Use your checkbook register, credit card statement, etc. to review your income and spending history for six months. Don’t think of this as budgeting…think of it as a spending plan. Once you determine how much you can spend for groceries or at the mall, use a shopping list and stick to it. Eliminate impulse spending. Pay yourself first; set aside 10% for savings and investments before you spend the rest of your paycheck. Set aside money each month in a short term savings to pay for annual bills, such as Christmas, taxes or insurance. Find ways to cut Income Taxes. Establish an emergency fund that you can get to quickly and easily to see you through a financial crisis.

With a solid spending plan and emergency fund in place, you will be able to create an investment strategy. Understand your own tolerance for risk. Then fund an IRA and, even if you don't qualify for a deduction, get the benefit of tax-deferred compounding of earnings. Also sign up for any employer's retirement plan, which will give you two major tax breaks: contributions are pretax and earnings are tax deferred until withdrawal. If a company match is available, invest enough to meet the amount they will contribute. Avoid borrowing from a retirement plan. Don’t cash out when you change jobs; this can result in taxes, penalties and the loss of tax-deferred growth. Avoid cashing out unless it is an absolute financial necessity. Choose not to spend the money now, because you want to put it to other uses later. Roll the money over into your new employer’s tax-qualified plan or into an individual retirement account.

At this stage it is also important to make sure your loved ones are protected financially by getting adequate life insurance coverage.