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Hot Tips for Shaping Your Long-Term Goals

The future is not so far away as you may think, and to quote a favorite line from W.H. Auden, “The years shall run like rabbits”. You may have noticed that as you get older, time goes by faster and the months begin to blur into years. Planning for the future you want to enjoy when you’re older, and taking action to secure that future, is paramount!

We’ve previously discussed the nature of short-term goals, which are for saving money for emergencies, and six months of income in case you lose your job. Midterm goals, as you know, are for funds you’ll need in the next 3-5 years. Long-term financial goals are goals that may take more than five years to achieve, and consist of substantial outcomes such as saving and investing for a comfortable retirement, paying off all your debts including your mortgage, and perhaps building a legacy to pass on to your children and grandchildren.

Achieving your vision depends on several factors, such as how much money you save and invest each month, how many years you save and invest, the amount of time remaining before you’ll need your funds for retirement, and reflecting carefully on the kind of lifestyle you want to enjoy when you are in retirement.

We’re fortunate that in the United States there are a number of opportunities for accelerating your savings. One of the best ways to meet your long-term goals is by partly funding your retirement account with your employer’s 401(k) plan. Among employers who offer a 401(k) plan, the plan often includes annual contributions paid by the company into your retirement account, capped at a set dollar amount. This means your money will grow faster and your goals will draw nearer to achievement because of employer contributions. Whenever you can, take advantage of the opportunity to grow your retirement account, especially with “free” money that could be available to you as an employee benefit.

If your employer does not have a 401(k) plan, consider asking your employer to establish a company 401(k) plan. The company could save money by diverting funds that would otherwise be spent on taxes, and the owner and top executives can also increase their retirement savings with pretax dollars, benefiting everyone in the company.

With a 401(k) plan, not only would a financial program be available that builds everyone’s retirement account, but also, because taxable income is reduced, there is likely to be an additional tax savings benefit as well.

If you are self-employed, you can establish your own individual 401(k) plan if you are a sole proprietor with no employees other than your spouse. Just like IRAs, the individual 401(k) has a traditional and Roth version.

When saving for your long-term goals, a general rule of thumb for families is saving at least 10% of the family’s monthly gross income for retirement. Single people should allocate an even larger percentage of their monthly gross income because even though there are many exciting things on which to spend your money, it’s inevitable that the day will come when your priorities will change and you’ll want to have a home, maybe raise a family, and certainly prepare now for the funds you’ll need in the last third of your life.

Most people don’t really know how much money to set aside every month for their retirement, so saving and investing becomes a frightening prospect because of the unknown. Many people become paralyzed with the prospect of saving vast amounts of money over a long period of time, so they hesitate to look at and face the challenge. The longer they wait, the less time they have to invest properly. and yet, the solution is not as complicated as it may appear.

A wise solution is to consult with a financial advisor who can discuss your long-term goals with you, consider the amount of time you have left to set aside these funds, analyze your risk tolerance, and devise an investment plan along with a rate of return your investments should achieve annually to keep you on track with having the money you’ll need 20, 30, or 40 years in the future. An experienced financial advisor is a great resource for determining the precise amount of money you’ll need for your unique financial situation, and creating a tailored plan to help you acquire your funded future during the intervening years between today and the age when you want to step through the Golden Door.

If you don’t yet have a coordinated retirement plan that you review annually with your financial advisor, or you’d like to review the one you have for a second opinion, or perhaps you need to make changes to the plan you now have because your financial circumstances have changed since the plan was first created, consider contacting a fee-based financial advisor as soon as possible. Just think how relaxed and confident you’ll become when you know that every day your future is growing brighter!

We hope this article about 401(k) plans and the importance of setting long-term goals was informative, and if you’d like to establish a 401(k) plan in your company, or if you’d like us to review your retirement plan and your financial investment strategy, we’d be delighted. We believe we can secure and increase your personal wealth while enhancing your retirement. Thank you!

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

13231 SE 36th Street, Suite 215

Bellevue, WA 98006

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com