Six Investing Questions Every Mid-Career Woman Needs to Ask…
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By the time most professional women reach mid-career (self-defined as mid 30’s to mid-50’s) they have started to accumulate an eclectic mix of investment accounts. Now is the time to take a mindful money moment and evaluate what investments and investing habits are serving you and which you may need to revise given your current lifestyle, financial circumstances and future goals. Start with these 6 investing questions.
- “What comes to mind when I think of the word invest?” While this question is simple, it is powerful. What thoughts, beliefs and attitudes do you have toward investing? Do you see investing as an opportunity full of possibilities and gain? Does the thought of investing convey thoughts of complication, downside and loss? Underlying thoughts and feelings could negatively impact how you are investing, especially if you do not have an awareness of those feelings and your resulting behavior. Negative feelings could cause you to avoid investing or place it at the bottom of your to-do list. Likewise, if you are overly optimistic about investing you might be surprised, even frustrated, when your accounts fluctuate. Finding a baseline of your emotional connection, establishing realistic investing attitudes and evaluating your historical investing behavior can be a great place to start.
- Itemize all your investment accounts and ask: “why am I Investing funds in this account this way?” When I first work with clients, we spend a significant amount of time getting organized. Detailing everything they own (assets) and what they owe (liabilities). It is not uncommon to find “lost” accounts through this process or accounts that have been sitting in cash for years! Gather all your statements and break out the account owner, type of account, value, and summary of how the account is invested. See below for a quick example. Alternatively, there are various financial aggregators that can do this for you electronically with the ability to then evaluate what your asset allocation looks like globally or by goal. As an example, our firm utilizes eMoney to get and keep clients financially organized.
Now ask yourself on each account why it is invested the way it is? Does it need to change based on when and how you plan to use those funds? If you can’t confidently answer that question, don’t have time or want to avoid it at all costs, it might be time to engage a professional financial planner. Check out www.letsmakeaplan.org to research hiring a professional and perform a search for local planners.
- What am I investing today? Most mid-career women should be investing 10 to 15% of income, more if you were a late bloomer investor. Start with contributing into your employer retirement plan if plan fees and investment options are favorable, which is usually the case. If you are a high-income earner you may need to invest outside your work retirement plan. At this point, it can also be beneficial to engage a professional on investing recommendations outside of your work retirement plan. Regardless, automate your investing outside of your retirement plan too so that you regularly put new money into the market. Don’t let your busy schedule or overthinking the stock market get in your way. Have an investing plan for extra regular monthly cashflow as well as “surprise” lump sums like bonuses and tax refunds.
- What is the tax impact of my investing? Prioritize your current investing into tax advantaged accounts. Understand if you are making traditional deductible or pre-tax contributions that reduce your taxes now, but will create a tax liability when you withdraw funds. Alternatively, you may be able to make Roth retirement plan or Roth IRA contributions that do not reduce your taxes today, but will allow you to take the money out tax free assuming you meet all withdrawal rules. Which method is better? A healthy mix of both accounts that considers your specific tax rate now and your projected tax rate in retirement. It is possible tax rates could get lower, but it is probable they may not, so I encourage most mid-career clients to evaluate building a Roth bucket as part of their overall investment plan.
Health Savings accounts are a triple tax beneficial account that can be invested. Note that you can only make new contributions if you have a qualified high deductible health plan. This account is a tax score because it is tax deductible, grows tax free and can be withdrawn tax free if used on qualifying medical expense.
Finally, on this question, go back to your list of accounts and evaluate if your asset location makes sense. Keep tax inefficient investments, investments that are taxed at your ordinary income tax rate in Tax Deferred Accounts (bonds, high turnover assets). Keep tax efficient investments, investments that are taxed at the capital gains rate or are tax advantaged, in taxable accounts (Exchange Traded Funds, Growth Stocks, Municipal Bonds)
- Are my investments on track? Once your investments are aligned with your goals it’s time to see if you are on target to meet your short, mid and long-term goals. There are several projection and financial calculator resources online that can be used as a starting point. However, understanding the assumptions of these calculators is critical because they may be materially different than your reality. For example, does your family have an advanced life expectancy; will your child go to college 4, 5 or 6 years; what is the assumed rate of return and is this realistic? Once into your your 40’s, it can be extremely beneficial to see if you need to adjust your investing path, allocation, contributions or potentially modify goals. You still have time to get back on course! Need help? See what tools your retirement plan administrator offers or seek out a CFP® professional.
- What is holding me back from being the best investor I can be? Is it time, information, not enough money that is holding you back? My favorite two rules of investing are invest early and invest often. Understand that there is never a perfect investment portfolio or a perfect time to invest because all we have is historical information and are not certain what future markets will bring. There can be two negative consequences with a perfection investing mindset. First, some women don’t invest and thus sabotage their long-term financial health. Secondly, making frequent changes to your portfolio can be damaging because of trading costs and not allowing assets to get through a full market cycle, so that you can capture upside, not just negative volatility. Pick a diversified portfolio that is well-positioned to get you the long-term return you need but doesn’t take on so much risk you can’t sleep at night. Happy investing and don’t forget to invest early and often!
Brooke Napiwocki, CFP®, MBA
Crescendo Wealth Management LLC
- Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP®, Certified Financial Planner™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
- The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.
- Securities offered through J.W. Cole Financial, Inc. (JWC) Member FINRA/SIPC. Advisory services offered through J.W. Cole Advisors, Inc. (JWCA). Crescendo Wealth Management, LLC and JWC/JWCA are unaffiliated entities.