Young Money by Dasarte Yarnway

Author:Dasarte Yarnway
Language: eng
Format: epub
Publisher: Berrett-Koehler Publishers, Inc.
Published: 2018-03-12T04:00:00+00:00

Retirement and Investment Management Goals

You’re probably asking yourself, “What is the difference between retirement and investment management goals?” That’s a good question. In retirement, you won’t have income from employment because, duh, you’ll be retired. Strategizing for your retirement requires that you know exactly what you want to do in retirement and how you’d like to live. You’ll need to calculate “your number,” that is, an amount that you’d like to save from now until the year that you plan to retire. You’ll need to know how much your retired self will be spending on a yearly basis, your tax bracket, and how much additional assistance you’ll get from the government, such as through Social Security and Medicare. Trying to figure all this out now might give you a brain freeze. But say it with me again: It’s not magic, it’s math. Like many others, I did not really like math (and sometimes still do not) until I figured out that understanding numbers could have a dramatic effect on my goals.

The quickest way to begin to plan for retirement is to put money away in addition to your employer-sponsored retirement account. Open a Roth or traditional IRA, then begin systematically investing. Dollar cost averaging is a systematic, risk-mitigating investment strategy that requires the investor to choose a frequency for investing a stated amount of money. For example, you commit to making a $100 contribution to your investment account on the fifteenth of every month. This is beneficial because it is not contingent upon timing or the state of the market, which often complicates the process. It also allows you to account for the payment in your Master Budget. Platforms like Betterment and Wealthfront have made it easy for Millennials and Gen Xers to get started on their IRAs without worrying about account minimums and wolfish financial advisors.

Investment management, to me, is reserved for the goals that are in between where you are and where you want to be in retirement. It could be savings for your child’s education, buying your first or second home, or saving up for a wedding. Regardless, you’ll have to have your numbers in order so that a trusted professional can tell you if your expectations are too lofty given the amount of money that you are working with. This is goal-based investing in its truest form, and the gains will show in the traditional manner of percentage increases. (For more on mastering investing, go to chapter 7.)

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