9 for 2009 The 9 Things You Need On Your 2009 Financial To Do List

By Joana McDonnell
As if a volatile stock market, record foreclosures, looming layoffs, escalating gas and food prices and experts’ predictions of continuing troubles aren’t bad enough, a recent study could result in a few more frown lines. Conducted by Ernst & Young on behalf of Americans for Secure Retirement+, a coalition of retirement security groups, the study shows that three out of five brand new middle-class retirees (read: Baby Boomers) will outlive their financial assets if they try to maintain their pre-retirement standard of living.
So we put out an SOS to three local financial advisors. The result: Girlfriendz Financial First Aid!
1. MAKE A PLAN “If you haven’t started a financial plan, do it now,” says Paul Tully, CFP*, of Eagle Wealth Strategies. “No more putting it off, I can’t stress that enough. Decide what age you want to retire, then anticipate in today’s dollars what that would cost and don’t forget to add for inflation.”
2. DIVERSIFY Research shows that women are more conservative investors than men. That can be problematic because statistically we live longer. We need more money for the long run, yet our investment strategy by nature is designed to produce less money. Tully says we have to look at our asset allocation and make sure we’re in different asset classes (i.e., stocks, bonds and hard assets like gold and real estate). “Have diversification within those categories and really spread stuff out. That’s how you mitigate the risk.”
3. BUY LOW/SELL HIGH It’s one of the most basic rules of investing, but when the market drops 750 points in one day, investors’ fears can kick in, says Girlfriendz Financial Columnist Linda Lane of First Financial Group/MassMutual. “Sometimes people go against common sense. This is the opportunity they say they want, but fear drives them to sell. Take a breath, step back and remember that historically, drops in the market are followed by rallies.”
4. DON’T IGNORE YOUR 401K Experts strongly advise you to invest up to your employer’s match because it’s free money. “If you’re having emergency cash flow problems, I still say put in as much as the company match, then ease up on the rest of the amount that you can still contribute beyond what the employer matches,” says Tully.
5. MIND YOUR TAX SITUATION Lance Leimberg, CFP, CRPC**, of Ameriprise Financial urges diversification from a tax standpoint as well. Consider a Roth IRA. It’s tax free upon withdrawal especially if you have a pension that’s taxable. And don’t forget you’ll be paying taxes on your 401k at time of distribution. “If you’re a 50 year old woman trying to decide whether to do a Roth IRA or continue with a 401k, ultimately it depends on your tax bracket today and how much you expect to pay in the future.” ++
6. MIND YOUR INSURANCE, TOO Tully advises this is a good time to review all forms of your insurance. “Look at your homeowner’s policy. You may want to increase your deductibles. A typical deductible is $250. If you raise it to $500 you’ll save on your yearly premium.” The same goes for car insurance. Comb through your policy to find savings from: safety and security equipment eligibility, having a clean driving record and completing a defensive driving course.
7. AND DON’T FORGET TO INSURE YOUR INCOME Many employers offer disability income insurance, and if you become disabled, you may only be covered for 60% of your base salary. But Lane cautions this may not be enough because generally you are insured on your base salary only, not including commissions or bonuses. “I always say take the company plan because it’s free or cheap but buy individual disability income insurance to fill in the gap. It’s portable, and because you pay the premium on it, the benefits come to you tax free.”
8. DUMP THE DEBT With credit card interest high, now’s the time to pay them off. Once your balance is gone, says Tully, be careful with discretionary purchases, and don’t use your card unless you can pay the balance in full.
9. SAVING FOR COLLEGE If you have children, experts say it’s never too early to start saving for college. But if college is now and you haven’t saved enough or have lost money in the market, Leimberg recommends not letting your emotions take over. “You can always take a loan for college but you can’t take a loan for retirement. If you’re willing to work longer to help your child pay for college, that’s great. But if you can’t wait until the day you leave your job, you need to protect your retirement first.” Our experts note that gathering investment advice from the internet, books, periodicals and TV personalities is a good way to collect information to help form opinions. But when it comes to making solid investment decisions, a professional can take the emotion out of the process and inject an unbiased component to your ultimate course of action. Just don’t overlook your long-term planning.
Tully thinks women are better investors than men. “When I’m dealing with women, they have a more values-based approach to their money while guys are interested in just numbers. Women are better planners and just more patient.”