Money Power: Retirement saving: one worker's strategy
BY JANE BENNETT CLARK Money Power
Saturday, February 23, 2013
2/23/13 at 5:16 AM
Let's analyze one saver's retirement investment strategy to learn what he may be doing wrong, and right, and how he might change his tactics if necessary.
The subject:
Jeff Quigley, 40, is a certified public accountant at Tate & Tryon, an accounting firm in Washington, D.C.
He has contributed to his 401(k) since becoming eligible, six months after joining the firm in 1996. Quigley likes the idea that the money comes directly out of his paycheck.
"It's forced savings - you start living on what's in your paycheck," he said.
Quigley contributes the annual maximum allowed, which is $17,500 this year.
"Initially, I just contributed enough to get the company match, but one day I thought, 'Why am I not maxing out?' I wanted less taxable income."
Of the 13 funds the company plan offers, Quigley chose four, allocating 75 percent to U.S. and international stock funds and 25 percent to bonds and short-term investments.
"I've always enjoyed stocks, so that affects my allocation," he said. "I kind of live or die by the stock market. There are more risks but more potential for reward.
"Bonds aren't sexy. ... It's a boring way to invest."
Quigley also has a taxable account, with a similar allocation of stocks and fixed income.
The advice:
Quigley should continue to meet the company match, says Jon Ten Haagen, a certified financial planner in Huntington, N.Y. But he might consider diverting some of his retirement savings to a Roth IRA - if he qualifies - in order to have access to the universe of investment choices, along with tax-deferred growth and tax-free income in retirement.
For now, the 75-percent stock allocation is fine, but living and dying by the stock market is not a good plan for the long term.
Original Print Headline: Saving for retirement: one worker's strategy
Jane Bennett Clark is a senior editor at Kiplinger's Personal Finance magazine. To send her a question or comment, go to tulsaworld.com/kiplingerfeedback.
