At Onyx Investments, we recognize effective money management skills as one of the most important commitments that you can make in life. Retirement planning may require that we build hundreds of thousands, if not millions of dollars, in savings to back a comfortable life style throughout your Golden Years. As a young professional new to the workforce, choices between stocks, bonds, mutual funds, and retirement accounts can be especially daunting. To initiate the retirement planning process, we will work together to outline a list of well-defined goals. From here, Onyx Investments will help you select and set up the right types of accounts and investments in which to set money aside.
Young professionals are often concerned with marriage, children, advanced education, and homeownership. Beyond the here and now, goals for a retirement lifestyle provide a sense of long-term purpose for any financial plan. A retirement plan may include dreams of a Southern California lifestyle, which would be made complete with an expansive Pacific Coast Highway home, volunteer work, and daily rounds of golf. With a list of goals in hand, Onyx Investments can toggle through return, inflation, and taxation projections. These preliminary calculations will help us estimate the amount of cash that you should be saving each month at a projected rate of return to achieve your stated goals. As a young professional, time is on your side through the miracle that is compound interest. A $250 monthly investment that earns a 10 percent annual return grows into more than $1.5 million after 40 years.
Cash Management Strategies
Effective cash management strategy is the backbone supporting your retirement plan. Onyx Investments will advise you to minimize discretionary spending within your budget, if you are having trouble working off debt and meeting financial goals. Discretionary spending goes to procure consumer items, such as, concert tickets, designer jeans, and high-end electronics that are not necessary for survival and add no value. After agreeing upon a responsible budget, Onyx Investments will make recommendations regarding student loan debt management, insurance, and cash reserves. Through solid cash management strategy, you can preserve liquidity, without being forced to take early withdrawals from retirement accounts.
All retirement accounts feature tax deferral, which means that you will not owe taxes on dividend payments, interest income, and capital gains, as they occur within your retirement account. Onyx Investments can help young savers to set up 401(k) and Roth IRA retirement accounts. 401(k) plans allow for tax-deductible contributions, but withdrawals are subject to taxation at ordinary income rates upon retirement. As part of your employee benefits package, your employer will match your contributions on a dollar-for-dollar basis, up until a certain point. Alternatively, Roth IRA contributions are made with after-tax money, which allows for tax-free withdrawals. A Roth IRA is often ideal for a young professional — who expects to retire within a higher tax bracket. Be advised that retirement accounts feature built-in tax penalties, if you take withdrawals before the age of 59 ½.
Young professionals who invest money with longer time horizons can actually afford to take on more risks through stocks. Investment performance is volatile from year-to-year. Youth, however, grants savers additional freedom to buy and hold investments through deteriorating market conditions. Upon economic recovery, patient young savers typically stand poised to bankroll tidy profits over the long term. As a measure of U.S. stock market performance, the S&P 500 Index has averaged 11 percent annual returns since its 1957 inception. With age, young professionals can increase exposure to conservative bond market investments. As always, the goal is to facilitate growth, while also limiting downside risk.