Four STAGES in Your Life You NEED to INVEST

Investing is a lifelong process. These rules of thumb should be used as guidelines when discussing your investments with a financial planner. You need to grasp four shifting factors.

Starting out: under 30

Because you probably have no dependents, and you have plenty of time to recoup any temporary losses, you can invest aggressively at this stage of your life. When you get a raise increase your contribution to your company-sponsored retirement plan. Try to increase your cash reserves.

A good suggestion would be is that you invest 60 percent in solid growth stocks or growth stock funds, 20 percent in aggressive growth stocks or growth stock funds, 10 percent in growth-and-income funds, 5 percent in bonds or bond funds, and 5 percent in a money market fund. And remember to invest $2,000 or more every year in your IRA (individual retirement account) and to max out your 401(k) or 403(b) contributions.

Thirty-something

A person at this stage is young and maybe newly married. You need to take care of the family. If you have a child or children, you need some liquidity for all the adventures that come with growing up, while you save toward their college tuition or education. You also need to increase your life insurance. There are things still working in your favor as you plan for your financial future.

Suggestion: 40 percent in growth stocks, 30 percent in growth-and-income stock funds, 20 percent in bonds, and 10 percent in a money market fund. And remember to invest $2,000 every year in your individual retirement account (IRA) and to max out your 401(k) or 403(b) contributions.

Middle age: heading for 50

If you’re paying college tuition, you probably have less to invest. You need to review your retirement fund asset allocation to accommodate the shorter time frame for your investments. The need to provide income for retirement in the form of pension becomes more urgent.

Suggestion: 50 percent in growth stocks, 20 percent in aggressive growth stocks, 20 percent in growth-and-income stocks, and 10 percent in a money market fund. And remember: IRA and 401(k) or 403(b).

Ready to retire? The second half-century

You may be an empty-nester at this point, with your children getting out of college and starting work. Your goal is to accumulate money for retirement.
Assess your combined potential income after retirement and reallocate your investments to provide the income you need while still providing for some growth in capital to help cushion during high inflation rates.

Your first step in turning your retirement vision into reality is to invest more aggressively. The accepted wisdom of subtracting your age from 100 and investing that percentage of your portfolio in stocks. Suggestion: 40 percent in growth stock funds, 25 percent in growth-and-income stock funds, 15 percent in corporate bonds, 10 percent in U.S. Treasury notes, and 10 percent in a money market fund. IRA? 401(k) or 403(b)? What do you think?