As you move through your peak earning years, you’ll probably see your net worth steadily rise. At the same time, you’ll still have some work to do before you realize your financial goals. That’s why it’s important to have a solid plan in place, and make sure that you use all of the resources available to you. Here are some steps to help keep your portfolio on track.
Organize your portfolio. Asset allocation is a straightforward and effective strategy whereby you divide your portfolio among the major asset classes of equities, fixed-income securities, and cash equivalents. The division should be based on your goals, your tolerance for risk and your time horizons, all of which your 401(k) adviser can help you calculate. Generally speaking, the larger the equity portion of your portfolio, the greater the potential for growth and the greater amount of risk. On the other hand, the more fixed-income securities you include, the greater the potential for income and preservation of principle. There are also risks associated with fixed income investments, however, generally speaking, they incur less risk than equities. You may need to periodically rebalance your portfolio — to remain consistent with your original allocation — or modify it as you come closer to realizing your goals.
Don’t overlook tax planning. Chances are your income tax bracket is higher now than it was during your early years and than it will be when you retire. Maximizing pretax contributions to your employer-sponsored retirement plan, which provides tax-deferred savings opportunities, can allow you to take full advantage of this tax situation in retirement. By deferring taxes on investments until retirement, you could end up paying less in taxes over time.
Protect what you’ve accomplished. As your wealth continues to increase, it’s important to preserve what you’ve accumulated and safeguard your future. That’s why estate planning and life insurance are two of the cornerstones of a sound financial plan. A qualified legal professional can help you implement an estate plan that is best for your situation or review an existing plan to ensure it is still consistent with your goals. Also, be sure you have enough life insurance in place to help cover any liabilities — such as your mortgage — and protect your family’s financial future.
Financially speaking, mid-life shouldn’t be a time of crisis. Instead, it’s a time to take advantage of some of your most productive years. In the long run, you may be in a better position to enjoy the fruits of your labor.
Feel free to call me for more information:
Allan Watts
Financial Advisor
Tye Financial Group
859-321-1557
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