Guarding Your Financial Assets

June 19, 2009
A primer for investing at every age.

Cultivating a nest egg shouldn't be a late in life, last-minute gamble. Pensions, 401K accounts, stocks and real estate investments are all factors in a retirement package, and lining them up as soon as you graduate college, or even before, is the best way to ensure hearty returns later in life.

Waylon Peterson, senior vice president of investments, trusts and IRA services at the Teacher's Credit Union, says any young person can become a millionaire by middle age if they just do their homework. "If you're 25 today and you put away $155 a month into your retirement and it grows at eight percent, you can become a millionaire," Peterson says. "But if you're 50, you'd have to put $1,200 a month to away to get the same result."

Peterson's advice: retire debt-free. Even if you're planning to purchase a new car after you've hung up your nametag, make sure you're buying with a clean slate and have a paid-off mortgage.

Here's a forward-thinking exercise: Take your age, subtract it from 100, and the difference you get is what percentage of money you should have invested in the stock market. If you're 25, for instance, you should have 25 percent of your money in a guaranteed investment and 75 percent in conservative stock equity.

A recent study by the National Actuary Society revealed that, if you are 65 years old and married, you can expect a 50 percent chance that either you or your spouse will live to see 91. When social security was first implemented, the average life expectancy was about 65, and now, people are draining their retirement bank accounts too early.

Take advantage of your employer-sponsored plans, he says. If you're invited to participate in the 401K package, say yes. If you don't fully understand your options, consult a financial advisor before signing any paperwork. "The major mistake people make is they try to time the market, and they end up buying high and selling low," Peterson says. "Don't try to time the market. You should be reevaluating your assets at every age. You need to become more and more conservative the older you get."

Here's the decade-based breakdown:

"¢ At 25, start investing in your company's 401K plan.
"¢ At 35, try to get a 15-year mortgage instead of a 30-year, and save for your children's education with a 529 plan or a Roth IRA.
"¢ At 45, put money into that Roth IRA and attempt to pay off the house before your eldest child heads to college.
"¢ At 55, max out your 401K and Roth IRAs and make sure all your debts are cleared before you retire.
"¢ At 65, work longer, up until full social security age (67) to keep your health coverage secure.
"¢ At 75, take about four to five percent each year of your nest egg.
"¢ At 85, start investigating the ins and outs of estate planning.

With proper planning, conservative spending and long-term investing, a healthy financial future can be had at every age.

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