Page 1

The Pentegra Millennial

SMARTPATH

TM

The Path to Greater Financial Wellness


The Pentegra Millennial SmartPath™ The early years of your working career are full of firsts and are busy years, entering the workforce, buying a home, raising a family, advancing your career. There’s a lot going on, and you’re probably trying to juggle many things—including money. There are many financial goals that are likely on your plate right now: paying off college loans, saving for long term goals including retirement, and keeping debt under control. As the first true “post-pension” generation, millennials must save enough for retirement largely on their own. This can be challenging for a generation saddled with record levels of student loans. But millennials are rising to the challenge. In fact, despite the stereotypes, some studies show that millennial money habits are just as good—or better—than those of other generations. According to a recent J.D. Power study, nearly two thirds of millennials say they have saved $25,000 for retirement. The survey also found that 51 percent of millennials have set retirement goals1 and 63 percent are actively saving money.2 The Pentegra Millennial SmartPath™ provides valuable information to help you master the financial strategies you should look to adopt at this point in your life, and help you on the path to greater financial wellness and retirement readiness.

1 2

J.D. Power 2018 Group Retirement Satisfaction Study 2018 “Better Money Habits Millennial Report” Bank of America


Hey, Millennials — Retirement Matters! When you are in your twenties and just starting out in your career, saving for retirement might not seem that important. It can be hard to save for retirement when you have so many other demands on your money. One of the top stressors for millennials is falling short on savings, whether it is not saving enough, repaying student loans, spending more than they should, or not planning and saving for retirement.3 But did you know that getting a head start on saving while you’re young could have a significant impact on your future financial security? You hear a lot about the tax benefits of saving in a qualified retirement plan. But did you know that every time you contribute pretax money to your plan you’re potentially saving twice? First, you’re putting money away for retirement. Second, you’re paying less in current income taxes. Although competing financial priorities—such as paying off student loans—may make it difficult to maximize your retirement savings right away, contribute as much as you can afford. Be sure to set your contributions at a high enough level to qualify for the maximum in matching funds, or you will be leaving free money on the table. And while experts recommend annual contributions of between 10% and 15% of pretax pay, even small sums have the potential to grow over time. One of the biggest advantages of your retirement plan is that it puts saving on autopilot—making it easy to save and invest—and does it in a way that offers potential tax benefits. Research has shown that automatic features, such as auto-enrollment and auto-escalation have better positioned millennials in terms of retirement readiness than other generations.

Four in Ten millennials surveyed were automatically enrolled in a defined contribution plan, compared to 38% of Gen Xers and 33% of Baby Boomers4. Millennials are on track to replace 75% of their working income in retirement, a higher replacement rate than older workers 5.

32018

BetterMoney Habits Millennial Report” Bank of America Pro, “Millennials Reap Benefits of Pension Protection Act” July 17. 2018 5Benefits Pro, “Millennials Reap Benefits of Pension Protection Act” July 17. 2018 4Benefits

2

PENTEGRA


Getting a head start on saving while you’re young could have a significant

impact on your future financial security.


Put Time on Your Side with the Power of Compounding Saving for retirement while you’re in your twenties and thirties gives your savings more time to benefit from potential compounding. Compounding occurs when investments generate earnings and the reinvested earnings generate additional earnings. The longer the compounding process has to repeat itself, the larger your account balance may be at retirement. Fast forward to your future. Two coworkers, Michael and Mitchell, are attending a retirement party in their honor. With almost $803,000 in personal savings and investments, Michael is confident he can afford a comfortable retirement. Mitchell has about $271,000 — approximately one third that amount — and has already scaled back his plans because he worries that his nest egg won’t be enough to last throughout his retirement years.

Penny pincher?

Compared to Mitchell, it looks as though Michael really pinched pennies. But that’s not the case. Over the years, Michael and Mitchell saved the same amount of their pay—$110,400 each.

Fabulous investor? Then, you say, Michael must have earned better investment returns than Mitchell. Again, not so. Their investments both earned average annual total returns of 8%, compounded monthly. Why the difference?

In a word—time. By starting to save earlier than Mitchell, Michael used the power of compounding to his advantage.

What they did. When Michael was 25, he began a program of saving $230 a month. He didn’t withdraw money from his retirement fund for cars, home repairs, or his daughter’s summer camp expenses. He just kept putting $230 a month into his fund every year for 40 years. Mitchell waited until he was 45 to begin saving. He socked away $460 a month for 20 years, never missing a contribution or withdrawing money from his account. Despite his efforts, Mitchell never caught up to Michael. $1,000,000 $900,000 $800,000

$803,000

$700,000 $600,000 $500,000 $400,000 $300,000

$271,000

$200,000 $100,000 $0

4

PENTEGRA

$110,400

$110,400

Michael

Mitchell


Use the power of compounding to

your advantage.


Finding Extra Dollars To Save and Invest Where can you find extra dollars to put toward your savings and investments? While it might not be as easy as digging through your pockets for misplaced cash, you may be able to come up with additional money to invest just by making a few simple changes to your spending habits. The simple truth is that coffee and bagel on your way to work every morning and lunch at the sandwich shop may cost more than you realize. Everyday items may cost only a few dollars, but when those same dollars are put toward retirement savings and invested, they really can add up.

The $16,000 Cup of Coffee By saving just a few extra dollars every week, you could significantly increase your retirement savings. Saving just $4 weekly, or the cost of a cup of gourmet coffee over the course of 25 years can boost your retirement savings by $16,608. Saving these few extra dollars is easy when you think of it in these terms. Could you set aside an extra few dollars each week? If so, here’s some motivation to actually do it:

Buying lunch, once a week, $10/week – $520 a year = $41,519 boost in savings

Movies, once a month $15/month – $180 a year = $14,360 boost in savings

Gourmet coffee, once a week $4/week – $208 a year = $16,608 boost in savings

Take out for dinner, once a week $30/week – $1,560 a year = $124,469 boost in savings

Hypothetical examples of savings are based on contributions made to a tax-deferred retirement account earning an 8% annual rate of return compounded at the same rate as contributions over a 25-year period. Your own investment returns may earn more or less than this example.

6

PENTEGRA


By saving just a few extra dollars every week, you could

significantly increase your retirement savings.


Debt Can Hold You Back High monthly debt payments can dead-end your cash flow and prevent you from saving as much as you should toward your goals. And carrying too much debt can lower your credit score, which can affect your ability to get a job, buy affordable insurance, or qualify for low mortgage or car loan rates. Are You Spending Beyond Your Means? Your debt-to-income ratio is one measure that can tell you if you are spending beyond your means. Calculating the ratio yourself can give you a snapshot of your financial health. Get Started The first step is to add up all your monthly payments—housing costs (either your rent or your mortgage, insurance, property taxes, association fees, etc.), credit card payments, car loans, student loans, and any other fixed obligations. The next step is to figure out your monthly income from all sources. Include your gross (before tax) pay, investment income, bonuses, self-employment income, and any other income you regularly receive. Do the Math Calculate the ratio by dividing your total monthly debt payments by your monthly gross income to find what percentage of your money is going out to pay current debts. (Multiply by 100 to get your ratio as a percentage.) Most lenders consider a debt-to-income ratio of no more than 36% to be desirable for mortgage loan purposes (housing-related expenses should not exceed 28%). But the lower the ratio, the better.

OWN IT If you’re feeling overwhelmed by consumer debt, there’s no time like the present to start tackling it. These strategies can help. Develop a spending plan. Small changes in spending habits can lead to significant savings over time.

8

PENTEGRA

Downscale your life. Consider downsizing and cutting back on expensive vacations and frequent dinners out, and think twice before buying expensive items.

Use cash. Paying with cash straight out of your wallet may make you stop and reconsider unnecessary purchases.

Pay more than the minimum. Making only minimum payments on credit cards could significantly increase the amount you’ll eventually pay. Have a plan to pay off your balances one by one.

Pay your bills on time. Late payments may result in fees and a lower credit score.


Debt can prevent you from saving

as much as you should.


Don’t Push the Pause Button With a retirement savings plan, you’re in control of your financial future. You can fast-forward by making extra contributions to your plan account. Or you can reduce—or even stop—your contributions if you want to. The power to pause your contributions is meant to be a safety valve. It’s there in case you ever have a serious need. You might be tempted to cut back on your contributions for other reasons, however. Maybe you’d like to be taking home more money. Perhaps you’re upset by disappointing investment results. But before you make any changes, think about this: Pausing your contributions can be very expensive in the long term.

THE COST OF INTERRUPTING YOUR SAVINGS Juan and Jane contributed the same total amount. Both Juan and Jane contributed a total of $80,000. But Juan retired with $62,971 more because he never pushed the pause button on saving.

Juan Jane

Years Annual Contributions $2,000 1-40 1-5 6-10 11-40

$2,000 None $2,333

Both Juan and Jane Contributed a Total of $80,000 Plan Account Balance At Year 40 Juan Jane

$331,922 $289,783

This is a hypothetical example that assumes contributions are made monthly and investments earn a 6% average annual total return compounded monthly. Your contributions, investment returns, and balances will be different.

10

PENTEGRA


Pausing your contributions can be

very expensive in the long term.


What Happens When You Switch Jobs? As you build your career, you may be job hopping–and not always by choice. The gig economy is here to stay. In fact, millennials expect to have eight or more jobs in their lifetime. What happens to the money in your retirement plan account when you switch jobs is up to you. Typically, one of your options may be to take your savings in a single sum. Sounds like a windfall, right? Wrong. Here’s why you should think long and hard about cashing out your retirement savings.

More Now, Less Later You might like the idea of having some extra cash to pay bills, buy a car, or do something else. But remember this: Spending money you’ve earmarked for retirement before you retire will eventually mean less income after you retire. Will you be able to rebuild your account balance? Even if it’s still early in your career, taking a distribution, paying the taxes and any penalty that applies, and spending what’s left could make it harder to reach your retirement savings goals. Even if your balance is relatively small, the impact could be significant. Take a look at the chart to see what the “cost” of withdrawing just $8,000 at age 30 might be by the time a person reaches age 65.

The Cost of An Early Withdrawal Retirement Account Balance $8,000 $8,000 at Age 30 Withdrawal $8,000 $0 at Age 30 Contributions Age 30-65 $100 per month $100 per month Balance at Age 65* $142,471 $207,459 Cost of withddrawing $8,000-$64,988 * Assumes 6% average annual total investment return. Money will be taxed upon withdrawal. This is a hypothetical example with investment returns compounded monthly. Your investment returns and contributions will be different.

Don’t Forget Taxes Using your retirement money early can also have an immediate—and potentially substantial—tax cost. Before you withdraw your account, make sure you understand how a cash-out works. Since the money in your retirement savings account generally has not been taxed, you’ll have to include the distribution in your income on your federal (and possibly state) income tax return. Additional income means you’ll owe additional federal (and possibly state) income tax. The retirement plan is required to withhold 20% to send to the IRS as a “down payment” of sorts on your overall federal income-tax liability for the year. And the final surprise: You may also owe a 10% early withdrawal penalty, depending on your age.

12

PENTEGRA


SOME FOR YOU, SOME FOR THE IRS Federal Taxes

$4,400 Cash Remaining

$13,600

$2,000

Early Withdrawl Penalty

Here’s what cashing out a $20,000 retirement plan account might look like. n 22% federal taxes n 10% early withdrawal penalty n Cash remaining This hypothetical example is for illustrative purposes only and assumes a federal income tax rate of 22%. Your tax rate may be different, and you may be eligible for an exception to the 10% penalty for early withdrawals.

Think long and hard about

cashing out your retirement savings.


The Benefit Of Keeping Your Savings Tax Deferred Ima Saver and her friend Al Spendit both had $15,000 in their retirement accounts when they changed jobs. Ima rolled over her balance into her new employer’s plan and contributed $200 a month for the next 25 years. Al cashed out and started over. He also joined his new employer’s plan and, like Ima, contributed $200 a month for 25 years. However, his account balance never caught up. Even though they contributed the same amount and had identical earnings, Ima’s account balance was significantly more than Al’s because she kept her savings going.

$205,573 $138,599

Ima Saver’s account balance

Al Spendit’s account balance

This hypothetical example is for illustrative purposes only. It assumes a monthly contribution of $200 and an average annual return of 6% (compounded monthly). It does not represent any specific investment product offered by your plan and does not include any investment fees and expenses. Your investment returns will differ, and it is unlikely that your contribution amount will remain the same over a long period. Pretax contributions and related plan earnings will be subject to ordinary income taxes and a possible early withdrawal penalty upon distribution.

How Does a Rollover Work? When you choose to “roll over” your retirement money into your new employer’s retirement plan or an individual retirement account (IRA), the plan administrator will move the money in a trust-to-trust transfer for you, and you’ll avoid tax problems. Since the distribution isn’t paid to you, no income taxes are due and no penalty applies. If you take the money in a check, your plan must withhold 20% to pay federal income taxes, even if you intend to complete the rollover yourself. You’ll have to replace the missing 20% to accomplish a tax-free rollover of 100% of your funds.

14

PENTEGRA


Keep your

savings going.


College and Retirement: Making It Work When you created your financial plan, you may have put some money aside for a new baby’s future college expenses. And you probably started saving for retirement in your employer’s tax-deferred plan. But chances are good that your more immediate goals were the ones on your mind. Then your kids started kindergarten, and suddenly you realized college wasn’t so far off after all. In fact, 27% of millennials are already saving for their kids’ education . But how can you possibly save for both goals at the same time? 6

Get Your Priorities in Order It’s not easy to save for your retirement at the same time you’re saving for a child’s college education. So you might be tempted to put saving for retirement on the back burner and concentrate your efforts on building a college fund. But before you cut back on your contributions to your retirement account, keep these two important facts in mind: • You’ll probably need more money for your retirement than for any other goal you have. • While your child can borrow money to pay for college, you can’t borrow money to fund your retirement.

Retirement: Your First Priority Saving as much as possible in an employer’s tax-favored retirement plan, or an individual retirement account (IRA), can potentially help you accumulate a healthy nest egg. Generally, assets in IRAs, 401(k)s, and similar plans won’t be included in the calculation of your expected family contribution to education costs. And if you need cash for college, you’ll be able to withdraw money from your IRA without penalty to pay qualified higher education expenses, although income taxes may apply.

6

2018 “Better Money Habits Millennial Report” Bank of America.

16

PENTEGRA

Next: By starting to save for college while your child is young, you may be able to amass substantial assets. Section 529 college savings plans allow savings to accumulate tax deferred, and distributions to pay qualified higher education expenses at an eligible institution are tax free. Plans are set up to benefit a designated beneficiary, but if that child doesn’t use the funds, the beneficiary can be changed to another family member without tax consequences. Funds in 529 plans typically are treated as parents’ assets for financial aid purposes.


Plan to save for

both goals.


Get on the Same Page When It Comes to Investments

It’s not uncommon for couples to own multiple investment accounts—individual retirement accounts (IRAs) or employer-provided retirement accounts such as 401(k)s. Some couples share investment duties equally while other couples may agree that one individual in the relationship takes on the more active role in buying and selling investments. But what happens when couples disagree when it comes to choosing investments? Or can’t agree on what percentage of their salaries they should set aside for long-term goals? Or can’t even get on the same page about the whole issue of money and spending? Millennial couples are more likely than other generations to keep their finances separate. In fact, finances are the top source of tension in millennial households7. Identify Different Saving Priorities You will have to find some common ground if one of you wants to invest every extra dollar when the other wants to spend it. While financial security is important, it shouldn’t be at the expense of an enjoyable, interesting life. Why not choose a realistic amount to invest toward your goals and then set aside another amount to spend on yourselves? Coming to an agreement that considers one person’s desire for financial security without leaving the other partner feeling deprived can satisfy both the saver and the spender.

CONSIDER THE ISSUE OF RISK It’s not just different attitudes toward money that create problems for couples. You and your partner might have very different feelings about how much investment risk you are willing to take in pursuit of gains. What happens if each of you are at different ends of the risk scale? One of you might be an aggressive investor that seeks assets with the potential for earning higher returns over the long term, such as stocks. The other could be a conservative investor whose focus is on preserving principal and would prefer fixed-income and cash investments, even if it means earning returns that don’t keep pace with inflation. The immediate issue is to come up with an investment plan that satisfies both of you. A good start would be to meet your financial professional and ask for help in working out an investment strategy that allows for growth while addressing volatility. Having someone who is objective and can offer useful suggestions might help you reach a compromise.

7

2018 “Better Money Habits Millennial Report” Bank of America

18

PENTEGRA


Planning ahead can help you save enough money

to reach all of your important goals.


Understanding Investments There are two broad categories of retirement plan investments—passive and actively managed. Passive funds, also called index funds, attempt to replicate the performance of a broad market—or a market segment—by buying the same securities that make up a market index. With an actively managed fund, the fund’s managers actively direct the portfolio in an attempt to outperform market benchmarks. Both passive and actively managed funds invest in the three main categories of investments—stocks, bonds and fixed income funds. Stock Funds Stock funds invest in shares of stock in companies. A stock fund’s risk and return will depend on the types of stocks it purchases. • Large-capitalization funds hold stocks of large, well-known companies. They offer the potential for long-term capital appreciation. • Mid-capitalization funds hold stocks of medium-sized companies. Like large-capitalization funds, they offer the potential for long-term growth. • Small-capitalization funds generally own shares in companies in the early stages of their growth, whose shares could rise (or fall) in value significantly. Stock funds also may follow a growth or value strategy. Growth stocks are stocks of companies thought to be capable of higher than average earnings growth. Value stocks are considered to be “bargain priced,” since they are priced lower than stocks of similar companies in the same industry. The premise behind value investing is that the stocks may realize their potential down the road.

What kind of investor should consider stocks?

20

PENTEGRA

Stocks offer the highest potential investment returns over time but also involve the most amount of risk to your principal. Stocks may be a good option if you are investing for the long term, may not need your money for at least several years, and are comfortable with the natural investment risk inherent in stocks.


Bond Funds Bond funds invest in bonds and other interest-earning securities issued by governments and corporations. Some bond funds hold only U.S. government bonds, while others specialize in municipal securities or corporate bonds. Other funds hold a combination of government and corporate securities. Bonds are sold to raise money—to build factories or bridges or to expand public services. Bonds promise to pay fixed interest payments and, at the end of the loan (called the bond’s maturity), to pay the original investment (principal). Bond maturities generally range from 1 year to 30 years. In general, the longer the maturity, the higher the interest payments; the market will pay more for a longer-term loan. Conversely, the longer the maturity, the greater the risk, as bonds are interest rate sensitive. As interest rates rise and fall, the value of a bond rises and falls in the opposite direction.

What type of investor should consider bonds?

During periods of stock market volatility, bonds may provide some stability, since they often increase in value when stock values fall. A portfolio that includes funds holding intermediate- or long-term bonds commonly has the potential to earn returns that are greater than the rate of inflation. As with any investment, however, bond investors face various risks. Bond prices often fluctuate due to interest rate changes. Bonds may be a good option for investors willing to accept moderate risk who may not need their money for at least several years.

Fixed Income Funds Fixed Income investments are designed to protect the value of your money over short periods of time. These types of investments generally present a low risk of losing principal. Fixed income funds include money market investments as well as stable value funds. Money market funds invest in short-term securities issued by banks, corporations, and the U.S. Government and its agencies. Because these monies are held for shorter periods of time, the return is generally lower.

What type of investor should consider fixed income investments?

Many investors choose short-term funds for their relatively high degree of safety—but there is a price for this safety, the risk of not keeping up with inflation.

What types of investments best

suit your needs?


Choosing Investments Deciding on an appropriate asset allocation is a matter of balancing the potential for earnings and investment risk. There is no single ideal asset allocation. The mix that’s right for you won’t be the same as the one that suits your co-worker or your best friend. To find an asset allocation that’s right for you, look at three key things: your investing time horizon, your risk tolerance, and your overall financial goals. Measuring Time Horizon Determining your investing time horizon is straightforward—it’s the amount of time you have left to invest before you’ll need your money. If you have lots of time before you intend to retire, you might want to make the most of those years by building up your savings. You may be more comfortable investing a portion of your account in stocks because you’ll likely have time for your investments to recover from any downturns. Measuring Risk Tolerance Deciding how much to allocate to the various asset classes also depends on your risk tolerance. One aspect of your risk tolerance is your attitude—how you feel about taking risk. If the potential for higher returns far outweighs the risk of losing money, you may be inclined to invest heavily in stocks. But that’s only part of the picture. You may feel comfortable with a high level of investment risk, but there are other factors to consider. For instance, if your spouse’s job situation is tenuous, it may be wise to reduce your risk exposure until things are more settled financially. Ask yourself how much you’re willing to lose in a year. Any time investment losses would leave your financial situation in jeopardy, your capacity to take risk is reduced.

22

PENTEGRA


Average Annual Returns January 1978 - December 2018

4.6%

7.1%

11.2%

6.3%

Consider your time horizon and risk

8.7%

10.1%

tolerance.


A Lesson in Losses Sometimes, investments don’t just underperform, they fall into negative territory, but price fluctuations are part of long-term investing. Keep in mind that you don’t have an actual loss until you sell an investment for less than you paid for it. Until then, a loss that appears on your retirement plan statement is a “paper loss.” If you sell an investment that has lost value, not only do you lock in the loss, you also could miss out on significant gains if that investment recovers. You may intend to jump back into the market in time to catch the rebound, but it’s extremely difficult to get the timing right. Changes can occur very quickly. By the time you realize the market is recovering, it may be too late. Look at the Long Term Market downturns are inevitable. But when you’re investing for something that is years in the future, you probably have time to ride them out. The best strategy is to choose investments that fit your time frame, goals, and risk tolerance and then keep your eye on them. If a paper loss does crop up, the best course of action might be to do nothing and just give your portfolio some time. The chart below illustrates how much of a difference it can make if you miss out on months with strong performance. It compares the results of being invested in stocks all year with being invested for all but the month with the highest return.

MISSING THE BIGGEST MONTH MAKES A BIG DIFFERENCE

Year

Average Annual Total Return*

2012 2013 2014 2015 2016 2017

16.00% 32.39% 13.69% 1.38% 11.97% 21.83%

Excluding the Best Month 11.03% 25.87% 8.72% -6.50% 4.85% 17.18%

As measured the S&P 500, an index of the stocks of 500 major U.S. corporations. It is not possible to invest directly in an index. Index performance does not reflect the effects of investing costs and taxes. Actual results would vary from benchmarks and would likely have been lower. Past performance is not a guarantee of future results

24

PENTEGRA


Price fluctuations are part of

long-term investing.


Dollar-Cost Averaging—Taking the Guesswork Out of Investing What will the stock market do today? Soar to new heights, plunge to new lows, or settle somewhere in between? Ever since the beginning of stock trading, investors have looked for signs to indicate when stock prices will rise or fall. But, so far, no one has come up with a foolproof method for consistently predicting market upswings or downturns. Some investors use a “market timing” strategy by buying shares when they think stock prices are at their lowest and selling their investments when they believe the market has reached its peak. Although they may be successful some of the time, few investors can repeatedly time their buy-sell decisions to correspond with market movements. If you sell your investments when values start dropping and don’t get back in the market soon enough when prices start to rise again, you could miss out on significant gains. Instead of trying to guess what the securities markets are going to do, you may want to consider using an investment strategy known as “dollar-cost averaging.” With dollar-cost averaging, you invest a fixed amount of money in the same investment or investment type at regular intervals. Your money buys more shares when prices are low and fewer shares when prices are high. Although there are no guarantees, your average cost per share may be less than the average share price for the same period with this method. Investing in your retirement plan is a way to take advantage of dollar-cost averaging. Dollar-cost averaging won’t completely protect your portfolio from a loss if the market takes a plunge. But it may help reduce any losses and leave you in a good position to benefit from a recovery, since you’ll still be fully invested.

26

PENTEGRA


Take the guesswork out

of investing.


Learn from These Common Investing Mistakes Selling in a Panic When investment values decline significantly, it’s natural to feel concern. But selling in a panic can turn paper losses into real losses. Instead, investors who won’t need their retirement savings for many years might consider sticking with their long-term plan and giving their portfolio time to recover.

Investing Too Conservatively Fear of losses sometimes causes participants to invest so conservatively that they risk not earning sufficient returns to stay ahead of inflation. Although they can be volatile, including at least some growth-oriented investments, such as stocks, in an investment mix may help participants meet their goals.

Forgetting to Rebalance “Asset allocation” refers to how a portfolio is split among the major asset classes—stocks, bonds, and cash investments. Over time, performance differences can cause a portfolio’s asset allocation—and its risk exposure—to change. By rebalancing investments periodically, participants can maintain their long-term investment strategy.

28

PENTEGRA


Stick with your

long-term strategy.


Sound Strategies for Everyone Although everyone’s attitude toward investing and money is different, most investors share some common situations throughout their lives. The following are some major life events that most of us share and some investment decisions that you may want to consider: When you get your first “real” job: • Start a savings account to build a cash reserve. • Start a retirement fund and make regular monthly contributions, no matter how small. When you get a raise: • Increase your contribution to your company-sponsored retirement plan. • Invest after-tax dollars in municipal bonds that offer tax-exempt interest. • Increase your cash reserves. When you get married: • Determine your new investment contributions and allocations, taking into account your combined income and expenses. When you want to buy your first house: • Invest some of your non-retirement savings in a short-term investment specifically for funding your down payment, closing, and moving costs. When you have a child: • Increase your cash reserves. • Increase your life insurance. • Start a college fund. When you change jobs: • Review your investment strategy and asset allocation to accommodate a new salary and a different benefits package. • Consider your options for your account in your company’s retirement savings or pension plan. You may be able to either keep the money in your old plan, transfer it to your new employer’s plan, take a cash distribution, or roll the money over to an individual retirement account (IRA). When all your children have moved out of the house: • Boost your retirement savings contributions. When you reach 55: • Review your retirement fund asset allocation to accommodate the shorter time frame for your investments. • Continue saving for retirement.

30

PENTEGRA


When you retire: Carefully study the options you may have for taking money from your company retirement plan. Discuss your alternatives with your financial advisor. Review 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 beat inflation and fund your later years. Discipline and a financial advisor can help. Establishing a relationship with a trusted financial advisor can go a long way toward helping you practice smart money management over your entire lifetime.

Schedule annual reviews with your

financial advisor.


We hope the Pentegra Millennial SmartPath™ helps put you on the path to financial wellness. For more information, visit us at www.pentegra.com.

Follow our conversation


2 Enterprise Drive, Suite 408, Shelton, CT 06484-4694

800•872•3473 tel 203•925•0674 fax www.pentegra.com © 2019 Pentegra All Rights Reserved

Profile for pentegraretirementservices

The Pentegra Millennial SmartPath  

The Pentegra Millennial SmartPath