In Module 3 of the course, Introduction to Applied Investing, the emphasis was on long-term investment planning. While there is a lot of practical advice for middle-aged, married couples, there seems to be little written about investment planning for unmarried individuals. The following represents some basic advice for single people at two key ages.
Mid 20s Single Female
Mid-20’s and single: Don’t postpone long-term investment planning because you think you need to wait until you have a lifelong partner.
Remember to invest early and often! And if you take control of your own finances early in your working life, you’ll reap long-term rewards.
Simple planning steps include: developing a payroll deduction investment plan; paying down credit card and student loan debt; and establishing a budget on your spending. In the long-run. You’ll be thankful you did this early in life – regardless of your future martial situation. The Rule of Compounding will be on your side…
Single and worried? Don’t be!
Single in your mid-40’s: You may be a lifelong single, divorced, or widowed; childless, raising small children, or the parent of kids who are grown or nearly so; and responsible for aging parents or various other family members. Whatever your circumstance, it’s likely that you face countless demands on your time and resources. However, you need to keep focused on your long-term goals at this point in your life.
You’re probably earning more than you ever did before, so it is crucial to your financial well-being that you continue to invest fully in retirement plans with your employer – and that you should establish your own individual retirement account (IRA).
There are simple things you can do to invest in your future, including diversifying your portfolio, tax planning, managing inheritances or bonuses properly, and protecting your assets and your dependents. And don’t forget to have your will and advanced medical directives updated on a regular basis.
401(k) and IRA Contribution Limits: Retirement plan contributions are either required by your employer or are made voluntarily by you. The U.S. Internal Revenue Code limits the total amount that can be contributed:
- Limits on Employer Contributions. In 2013, the maximum contribution is 100% of an individual’s salary or $51,000, whichever is less. This pertains to all contributions, including both employee and employer contributions, but not after-tax contributions.
- Employee Contributions. The maximum contribution you can make to a 401(k) plan depends on your income, years of service, tax-deferred contributions you’ve made in the past and other factors. Generally, most individuals in the United States can save as much as $17,500 in 2013. If you are over age 50 and/or have worked more than 15 years at certain types of institutions, you may be able to contribute up to $23,000 annually.
- Individual Retirement Account Contributions: For 2013, the maximum you can contribute to all of your traditional and Roth IRAs is the smaller of $5,500 ($6,500 if you’re age 50 or older), or your taxable compensation for the year.
The morale of this story is for you to plan and act on your future. You should invest early and benefit from all tax-advantaged opportunities you have either through your employer or the tax code.