Whatever your financial priorities, whatever your stage in life, Independent Financial Services, can provide a plan.
| Young Investor |
 |
Your Circumstances...
You've just landed your first job fresh out of school. It's an exciting and challenging time; full of promise...you have your whole future ahead of you. It's exciting to be earning your own income and making your own personal financial decisions. But let's face it - setting priorities on a limited income can be challenging, especially when you don't know how long you may be working in your first "real job." You need to make sure you get the maximum return on your hard earned money.
Your Priorities...
Your priorities now may include paying off school loans, buying a car, saving for a home, or planning your wedding. Yet, focusing on retirement planning as soon as it is possible makes it easier to accumulate funds for the future.
By the Numbers...
At this stage in your life, retirement could be 30, 40 or even 50 years away. So why start planning for retirement now? Because time is on your side! With time as your ally, money set aside for retirement can better weather any adverse financial events. Let's take a look at an example of time being on your side:
Three investors want to reach a goal of $300,000 by the time they are 65:
- Investor 1, age 25 contributes $200 per month for only 5 years.
- Investor 2, age 35 contributes $200 per month for 15 years.
- Investor 3, age 45 – what is his total contribution? $65,800!! And, this investor doesn't hit the goal until age 72 plus 5 months!
Each investor contributes to an employer-sponsored tax qualified retirement plan earning an annual rate of 8%.
This example is hypothetical, does not reflect the return of any specific investment and is not a guarantee of future income. Fees and charges, if applicable, are not reflected in this example and would reduce the results shown. Income taxes are payable upon withdrawal. Federal restrictions and tax penalties may apply to early withdrawals.
Source: www.valic.com
| New Parents |
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Your Circumstances...
Welcoming a new addition into your family is much cause for joy and celebration. It is also a time for reassessing and organizing your financial situation.
Your Priorities...
This stage in life is typically characterized by managing cash flow, establishing a college fund, evaluating life insurance needs, and laying the ground work for a long-range investment program. A long-range investment program in this stage of your life could mean thinking about long-term care insurance and estate planning.
By the Numbers...
As new parents, you will want to establish a college fund for the latest addition to your family. Why? According to the U.S. Census Bureau (2004), there is a considerable gap between the salaries of those who are college graduates and those who aren't. A college degree can pave the way for a more secure future for your child.
| How a College Education Can Pay Off |
| Education Level |
Mean Annual Earnings |
| Not a high school graduate |
$21,600 |
| High school graduate |
$30,800 |
| Bachelor's degree |
$49,900 |
| Master's degree |
$59,500 |
| Ph.D. |
$79,400 |
Professional
(business, law, medicine) |
$95,700 |
Source: U.S. Census Bureau, 2004
| Growing Family |
 |
Your Circumstances...
Having a healthy and happy family is a goal we all strive for. Keeping your family well from a financial standpoint requires continuous effort and knowledge of appropriate priorities and goals.
Your Priorities...
Priorities during this life stage include managing cash flow, college funding, adequate insurance coverage, and accumulation of assets. Retirement planning should also be a top concern.
By the Numbers...
Teaching kids to be money-smart at an early age can inspire them to be financially responsible adults.
Here are a few pointers in helping your children respect money:
- Six – an appropriate age to begin an allowance. Most children at this age recognize that money can buy "stuff."
- Twice a year –allow your children to request an allowance raise a maximum of two times a year. Discussing their personal financial concerns will show them that money and financial matters are important topics in your household.
- 10% - of the money your child is given (as gifts, allowance, etc.) should be designated for savings. Learning about saving early on can help make it a lifelong habit.
- One-to-one – if your child is planning to purchase a relatively expensive item like in-line skates or a computer game, consider matching his/her savings dollar for dollar. Matching one-to-one will encourage goal setting and saving.
Source: MFS Investment Management Heritage Planning Article "9 Steps to Raising Money-Smart Kids"
| Single Parent |
 |
Your Circumstances...
Raising a child on your own is tough in this day and age. There are numerous demands on your time as well as your pocketbook. Single parents face unique monetary challenges while trying simultaneously to nurture their children and be responsible for their own financial needs.
Your Priorities...
Budgeting and managing cash flow, saving for your child's college education, planning your retirement and making sure you are covered from an insurance standpoint are common goals for this life cycle stage.
By the Numbers...
It's pretty easy to budget for large monthly fixed expenses like your car and mortgage payments; however, it's the variable expenses that have a tendency to get out of hand. Think twice before spending $3.00 a day when buying a muffin and juice or coffee everyday for breakfast. Saving that $3.00 can put $90 more a month in your retirement plan – that's $1,100 annually! Same goes for impulsive buys like CDs, DVDs and magazines at the checkout – while individually they are inexpensive, these quickie purchases can certainly add up over time.
Try out these tips for controlling your money:
- Keep a journal– For one week, record everything you buy – you'll be amazed how the little things add up.
- Cash only please – it's much more painful to give cold hard cash than plastic. Using cash will curtail spontaneous purchases.
- Wait 24 hours prior to purchasing anything with a price tag over $100 – if you truly want the item, you will make the effort to go back to the store to buy it, if not, you'll save yourself $100.
Source: www.MsMoney.com
| Empty Nest |
 |
Your Circumstances...
Finally you have the home all to yourselves. It's no longer necessary to focus time, energy and resources on nurturing your children. Being on your own again is cause for rethinking financial priorities. Since you no longer have dependents, you may now be able to afford to travel or buy a vacation home. Since you need less living space, you may be considering downsizing your primary home.
Your Priorities...
The accumulation of additional assets is still important at this stage, but now the main priority is to start preserving existing wealth and planning for retirement. Depending on how long it is until your retirement, you may need to adjust your investment mix to reflect a shorter time horizon. You may also want to consider long term care needs.
By the Numbers...
At this point in your life, you may want to purchase long-term care insurance if you haven't already done so. A policy purchased earlier in life may be considerably less expensive than buying the same policy at age 70.
- During the past 30 years, life expectancy has increased from age 71 to age 77, while the common retirement age has declined from age 65 to age 62. People are living longer and enjoying longer retirements, however, they are also facing the potential exposure to ever increasing health care costs.
- By costing anywhere from $40,000 to $80,000 on an annual basis (depending on the area of the country), just one year in a nursing home can disrupt even the most well-planned for retirement.
Average Daily Rate for Nursing Home Care - Private vs. Semi-Private Room
| Pre-Retiree |
 |
Your Circumstances...
We all dream of a comfortable, care-free retirement - a time when we can finally enjoy the fruits of our labor. With retirement age looming ahead, planning becomes critical during this period just before retirement – in fact, it's one of the most important times during the entire retirement planning process.
Your Priorities...
Now, conserving assets and principal should be a major priority. Growth is still needed to meet your objectives and may help prevent your funds from being depleted too soon. With the end reward in sight, don't stop your investment program, but do look at the need for adjusting your investment mix to reflect a shorter-time horizon.
By the Numbers...
The statistics below show some alarming trends that need to be planned for before and during the pre-retirement stage.
- A typical 65-year old man and woman can expect to live to ages 81 and 85 respectively.
- One-fifth of 65-year old men (and one-third of 65-year old women) will live to age 90 or older.
- The most common age of retirement has decreased from age 65 to age 62.
- Retiring at age 62, could mean the typical retiree could face another 20 plus years of living.
- Let time be an ally as the table below illustrates:
| |
Investor A |
Investor B |
| Amount invested for first 10 years |
$2,000 per year |
$0 per year |
| Amount invested for second 10 years |
$0 per year |
$3,000 per year |
| Total investment outlay |
$20,000 |
$30,000 |
| Account worth at the end of 20 years in a tax-deferred account assuming a 6% rate |
$48,421 |
$45,313 |
| % of account value after 20 years that represents earnings |
59% |
34% |
Sources: www.nber.org, MFS Investment Management Heritage Planning Article "10 Rules for the Retirement Road"
| Retiree |
 |
Your Circumstances...
Realizing a secure retirement doesn't just happen by accident. For most of us it takes a tremendous amount of planning and preparation. You worked hard most of your life, and you've earned the right to enjoy yourself.
Your Priorities...
Estate planning may be a major priority, as well as living off the assets and principal you have accumulated over time from your investments.
By the Numbers...
- 3.4 is the number of workers per Social Security beneficiary today. By 2030, that number will decline to 2.1 workers per beneficiary.
- 38% of a retiree's annual income is received from Social Security.
- 82.5 years is the life expectancy of a 65 year old. In 1940, the life expectancy of a 65 year old was 77.5 years.
Source: Social Security Administration, 2003 as quoted in "10 Rules for the Retirement Road," published by MFS Investment Management.
Whatever your financial priorities, whatever your stage in life, Independent Financial Services, can provide a plan.