Diversity Woman Magazine

WIN 2019

Leadership and Executive Development for women of all races, cultures and backgrounds

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DW Life > 42 D I V E R S I T Y W O M A N W i n t e r 2 0 1 9 d i v e r s i t y w o m a n . c o m Set clear financial goals "Whether you're single or in a com- mitted relationship, take the time to visualize how retirement will look," says Nadine Gordon Lee, CPA/PFS, CFP, and a coauthor of Personal Financial Planning for Executives and Entrepreneurs: e Path to Financial Peace of Mind. Consider some questions: Where will I live? How will I spend my free time? Will I work part- time? en, write down the life goals you want to achieve such as: • Retiring early • Taking annual luxury vacations • Funding children's/grandchildren's education • Living in a dream location • Giving generously to charity • Leaving a legacy for your children "If you are having challenges articulat- ing a clear vision of retired life, speak to an advisor to help you resolve internal conflicts and figure out a path forward," says Lee. Complete a financial plan At a minimum, says Lee, your financial strategy should including the following: • Net worth statement. is statement outlines what you own minus what you owe. If your assets, such as equity in a house, car, investments, and art, total $545,000, and your debt, includ- ing credit cards, a car payment, and a mortgage, totals $300,000, then your net worth is $245,000. • Current investment allocation. Determine which mix of asset categories, like stocks, bonds, and cash, to hold in your portfolio. • Cash f low needed during retirement. Review debts and expenses as well as investments to figure out how much you will need to retire comfortably. • Long-term analysis. is category covers cash inflows, outflows, and wealth accumulation. • Monte Carlo analysis. is computer- generated, randomized analysis will give you a better idea if your retire- ment is sufficiently funded or if addi- tional savings are needed after taking into account potential market volatility, says Lee. • Sources of guaranteed in- come. Take into account pensions, annuities, Social Security, and variable income such as broker- age accounts, IRAs, and 401(k)s. • Estimate of future taxes owed. An advi- sor can help you determine any taxes owed on tax-deferred sav- ings and other variable income. Once the above items are in place, Lee advises, stress-test your plan: "Run a variety of 'what if ' scenarios like retir- ing early due to a layoff or poor health or supporting a child or parent in need." Knowing how these events can impact your finances will help you plan. Invest in wealth escalators The 401(k). Senior-level executives likely have a 401(k) or similar em- ployer-sponsored retirement plan but may not know how to maximize their hard-earned savings. "Maxing out your retirement contributions is a good way to ensure you're building wealth and allows you to get the best bang for your buck," says Andrew Westlin, CFP, finan- cial planner at Betterment. Also, check your contribution rate and save enough at least to get the company match. If your plan offers auto-escalation—a feature that automatically increases an employee's contribution amount—take advantage of it to increase your savings, says Westlin. The traditional IRA. ere are three real wealth benefits to investing in IRA plans: • Contributions are made on a pretax basis. "e full amount of your contri- bution is added to your retirement ac- count without tax being deducted from ISTOCKPHOTO it," says Hilary Tuohy, certified divorce financial analyst at New Leaf Financial Advisory in Sausalito, California. • Contributions grow on a tax-deferred basis. "All of the capital gains and divi- dends earned during the investment period grow tax-free," says Tuohy. "e compounding effect on your entire investment maximizes the benefits." • Contributions are matched. You've heard this before, and you'll hear it again. Take the company match; otherwise, you are leaving free money on the table! The Roth IRA. What makes the Roth different is that contributions are made after taxes are taken out of your pay- check. "Withdrawals from Roth IRAs are therefore tax-free in retirement as long as you are 59½ and have held the ac- count for at least five years," says Tuohy. The HSA. Studies have shown that a retired couple will need nearly $280,000 for health-care costs in retirement, not including long-term care. erefore it's wise to contribute to an HSA (Health Savings Account), a tax-favored savings plan to help pay for medical expenses. "Compared to a 401(k), a 403(b), an IRA, or the Roth, the HSA is the only account that offers triple-tax savings on contri- butions, earnings, and distributions," says Cheryl Washington, senior financial

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