Investing through life’s stages

Investing through life’s stages

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Q: My partner and I are both in our late 20s and were recently married in New York.

We’re thinking about buying a home in the next year or so and then adopting a child. How should we be allocating our savings for these expenses yet still focus on saving for retirement?

A: Congratulations on your marriage! Many LGBT investors will experience some common life events — getting married/partnered, buying a first home, starting a family, becoming an empty-nester and retiring — that will require them to reassess their investment situation and make adjustments as needed. Here’s a quick guide to help you through each phase.

Getting started

The first part of a lifelong investment strategy is establishing disciplined savings habits. Regardless of whether you are saving for retirement, a new house or just that extravagant dining-room set, you will need to develop strict budgetary practices. Regular contributions to savings or investment accounts are often the most productive; and if you can automate them, even better.

Universal factors that affect your investment decisions

Once you begin saving on a regular basis, you will soon have to decide how to invest the money you are saving. Regardless of what financial stage of life you are in, you will have to determine what your needs are and how comfortable you are with risk.

Investment objectives. What do you need the money for? The answer to this question will help determine whether you want to put your savings into investment products that produce income for you or that concentrate on growing the value of your investment. For instance, a retirement fund does not need to produce income until you retire, so your investing strategy should focus on growth until you are close to retirement. After you retire, you’ll want to draw income from your investment while keeping your principal intact to the extent possible.

Time and risk tolerance. All investing involves a certain amount of risk. How well you tolerate price fluctuations in your investments will need to be balanced against your required rate of return in determining the amount of risk your investments should carry. An offsetting factor to risk is time. If you plan to hold an investment for a long time, you will probably tolerate more risk because you have the time to make up any losses you may experience early on. For a shorter-term investment, such as saving to buy a house, you may want to take on less risk and have more liquidity in your investments.

Investing: A lifelong journey

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 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. • Increase your cash reserves.

When you get married/partnered: 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 nonretirement savings in a short-term investment specifically for funding your down payment, closing and moving costs.

When you have a baby: • 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 distribution options for your company’s retirement savings or pension plan. Discuss with an advisor if a rollover into a new plan or IRA is appropriate.

When your children have moved out of the house: Boost your retirement savings contributions.

When you reach age 55: • Review your retirement fund asset allocation to accommodate the shorter timeframe for your investments. • Continue saving for retirement.

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. 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

One of the hardest things about investing is disciplining yourself to save an appropriate portion of your income regularly so that you work towards your investment goals. And if you’re not fascinated with investing (how can anyone not be fascinated with investing?), it may be hard to force yourself to review your financial situation and investment strategy on a regular basis. Establishing a relationship with a trusted financial advisor can go a long way toward helping you practice smart money management over your entire lifetime.

Jeremy Gussick is a financial advisor with LPL Financial, the nation’s largest independent broker-dealer.* Jeremy specializes in the financial planning needs of the LGBT community and was recently named a 2013 FIVE STAR Wealth Manager by Philadelphia Magazine.** He is active with several LGBT organizations in the Philadelphia region, including the Delaware Valley Legacy Fund and the Independence Business Alliance, the Philadelphia region’s LGBT chamber of commerce. OutMoney appears monthly. If you have a question for Jeremy, you can contact him at This email address is being protected from spambots. You need JavaScript enabled to view it.. LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.

This article was prepared with the assistance of Wealth Management Systems Inc. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you discuss your specific situation with a qualified tax or legal advisor. Please consult me if you have any questions.

Because of the possibility of human or mechanical error by Wealth Management Systems Inc., or its sources, neither Wealth Management Systems Inc., nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscribers’ or others’ use of the content.

There is no assurance that the strategies discussed are suitable for all investors or will yield positive outcomes. The purchase of certain securities may be required to effect some of the strategies. Investing involves risks including possible loss of principal. Asset allocation does not ensure a profit or protect against a loss.

*As reported by Financial Planning magazine, 1996-2013, based on total revenues. **Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of year 2012 and 2013 Five Star Wealth Managers.

Wealth Management Systems, Inc. and LPL Financial are not affiliated entities.

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