Column: Investing in the future

1. Anticipate that you are likely to live a long life. And plan accordingly. In fact, according to U.S. Census Bureau statistics, a woman who reaches age 50 today without serious health problems can anticipate celebrating her 92nd birthday. Women in the United States, on average, will live to reach 81.1 years of age, compared with men’s life expectancy of just 76.2. So if you’ve always left money matters to your husband, start learning why you need to know how to manage on your own.

2. Beware of being overly conservative in your investments. While there is a correlation between your age and the amount of risk you should assume when investing, being too conservative can seriously erode the value of a retirement account. You may need to rely on this money for 30 years or more. That’s why you should think of retirement as a long-term investment. Consider keeping a significant portion of your portfolio in stocks, as long a possible.

3. Pay yourself first. Invest for your future now. By investing systematically over a period of time, you will be surprised how fast your nest egg can grow. Hypothetically, if at age 25 you began investing about $5,000 per year ($417 per month) and earned an 8 percent return, you could build a nest egg of about $1.3 million at age 65.

4. Choose an IRA that’s right for you. Take advantage of complimentary IRA and pension calculators, or ask your Financial Advisor to run a calculator for you, to compare the projected results of contributing to different types of accounts, including transferring assets from a traditional IRA to a Roth IRA.

5.  Fund your IRA, 401(k) or other employer-sponsored program to the maximum. You can build up a good portion of your retirement savings if you contribute the maximum allowable amount into deferred income plans, such as a 401(k). You will you reduce your current taxable income, and the tax-deferred compounding feature of these plans allows you to accumulate more than you would in a comparable account that taxes earnings each year.

6. Remember this special Social Security tip: Even if you are divorced, you are entitled to half of your ex-spouse’s Social Security benefits if you are 62 or older, were married for at least 10 years and have not remarried. A widow, as long as she doesn’t remarry before age 60, is entitled to at least 71.5 percent of her husband’s Social Security benefits. If she waits until full retirement age, she is entitled to 100 percent. For more information on your particular circumstances, call the Social Security Administration.

7. If you are employed and decide to switch jobs, check your complete benefits package, including the portability and vesting rules of your retirement plan. The U.S. Bureau of Labor Statistics reports that, on average, working women over age 25 switch jobs every 4.8 years. This job-change frequency often limits the growth of retirement plan assets due to vesting requirements typically set at five years.

8. Investigate your employer’s tuition reimbursement benefits. In the Employee Benefit Research Institute’s 2011 Retirement Confidence Survey, 74 percent of workers said they expected to work for pay in retirement. Going back to school to develop “secondary employment skills” or to learn a new field can be a tremendous benefit if you choose to make a career or job change at a later date.

9.  Consider long-term care health insurance. Since the cost of spending a year in a nursing home can exceed $100,000 in some parts of the country, and the average duration of care is about three years, you could face unplanned expenses of at least $300,000 in retirement.

10.  Plan ahead to make sure you don’t leave everything to Uncle Sam. If you expect to leave something to your heirs, establish an appropriate estate plan. Without proper planning, estate taxes, state taxes and income taxes on retirement plan distributions could reduce your estate substantially. Essentially, your heirs may receive only a fraction of what you’ve worked so hard to accumulate.

Brooke Lowery is a financial planning associate at the Lowery Shelton Group – Morgan Stanley Smith Barney Vancouver Branch. She can be reached at 360.992.7994.

Morgan Stanley Smith Barney does not provide tax or legal advice. Please consult with your tax or legal advisor for such guidance.

For clients whose account is carried by Morgan Stanley & Co. Incorporated, Morgan Stanley Smith Barney offers insurance products in conjunction with Morgan Stanley Insurance Services Inc. For clients whose account is carried by Citigroup Global Markets Inc., Morgan Stanley Smith Barney offers insurance products in conjunction with SBHU Life Agency, Inc.

Article written by McGraw Hill and provided courtesy of Morgan Stanley Smith Barney Financial Advisor Lisa M Shelton, CRPC.

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