A Financial Roadmap for your Retirement: Part 3

By CB Mason

When creating a financial roadmap to reach retirement, there are multiple layers of savings to consider.  So far we have discussed an employer-sponsored plan and additional retirement savings options like individual retirement accounts, health savings accounts, and taxable investment accounts.  Go back to read the blogs from week one and week two of our series for what you may have missed. Now we will look at the next layer of the retirement plan – protecting your retirement nest egg with traditional savings accounts, educational savings accounts, and taxable investment accounts.

Savings Accounts

Assets in outside savings accounts can play a significant role in your family’s financial safety net. Having an emergency fund (typically 3-months of gross salary in a dedicated savings account) and goal-specific savings (money set aside for a specific purpose or project) can protect long-term assets. Ideally, you will not have to put expenses on a credit card or dip into retirement savings with these types of additional saving accounts. Just know that not all savings accounts are created equal. If you have $10,000 in your traditional savings account at a brick-and-mortar bank, you may be earning .01%. After a year, your total interest earned is $1. Moving it to savings account with a higher interest rate will increase your returns. The same $10,000 earning 0.6% will earn $60 a year. That is a difference of $59. Consider using an online bank or opening a taxable account at Fidelity Investments, which typically have higher interest rates.

Educational Savings Accounts

Saving for college expenses may play an essential role in your financial well-being. If you foresee a need for higher education for you or your children, consider opening a 529 college savings plan. The contributions to a college savings plan grow tax-free if used for qualified educational expenses like tuition, housing, books, laptop, etc. Funds can also be used for trade school or graduate school. Reach out for information to learn more about how state-sponsored and advisor-offered college savings plans differ to find the best one for your situation.

Taxable Investment Accounts

Taxable investment accounts are another layer that can add security to your retirement plans. Having an individual, joint, or trust investment account as an additional savings tool is recommended if you have exhausted all retirement and other tax-deferred contribution options.

The investments are wide-ranging and can be advantageous for both immediate and longer-term savings since investments should be held for longer than two years. We work closely with you to develop an investment plan that suits your needs and priorities.

If you have questions about an account still held at a former employer, how to layer an IRA or HSA into your financial roadmap, or need more information on savings, educational savings, or taxable accounts, we are here to help.