Family Guide on How to Start Investing

With so many different options for investing – 401(k)s, IRAs, taxable accounts, you might be wondering where should we put our money? 

Today we’re looking at how you can invest for you and your goals!

Where Should We Invest?

How

You talk to most families about investing, whether it’s for retirement or another goal and you get this sense of overwhelm. 

Part of it is due to having so many things you’re working on. 

Taking care of the kids. 

Saving for emergencies. 

Dealing with work. 

Paying off debts. 

It keeps you busy for sure, but because you’re doing a little here and there, many times, you’re spreading yourself and money thin. 

And you’re not making the progress you want to make. 

We had a bit of this when we were first got married and were figuring out what our priorities. 

It took a bit of time to really nail those down, but once we did it made things so much easier because we could then work on things one by one. 

It was less stress and we were actually making progress. 

So today I thought we could do with investing – break it down so you can see what options are available to you, like 401(k), Thrift Savings Plan, or IRA and then see how they fit in with whatever season of life you’re in. 

Drew Snider is here to help out. He’s the director in Financial Planning at Coastal Wealth Management. He’s also a husband and father so he gets it. 

In this episode we get into:

  • Conversations to have at certain milestones about finances
  • Major investment accounts you need to know about and how they work
  • How to align your money including investments with your priorities

Let’s get started!

Handy Resources to Start Investing and More

Whether you’re new to investing or looking to level up, here are some resources to get your there faster!

Thank You to Our Sponsor Coastal!

Support for this podcast comes from Coastal Credit Union!

If you live in the Triangle area of North Carolina and you’d like someone to work with you on your goals, you really want to check out Coastal’s Wealth Management team.

They’d love to help you start investing for retirement and more!

Where Are You on Your Financial Journey?

Elle Martinez: Some couples, they feel like, OK, like financial planning. And how does that fit in? But what we’ve noticed, like we’ve met with a financial planner, it just makes things so much easier, especially when you’re talking about something as big as retirement. So I wanted to kind of discuss maybe some conversations. You suggest couples have to keep the ball rolling about planning for retirement. What should they sit down and chat about first?

Drew Snider: Well, I would first say that I think it’s age-dependent and sort of where you are in the process. If you’re just starting out in your single or just married twenty five to thirty five, I think the first conversation is really about budgeting and making sure that as a family you’re putting aside 15 percent of your income for retirement. And if you’ve been started doing that when you first form your household at that age, you should be very well prepared for retirement. Those folks who are 35 to 50. So a more established family and younger children getting into middle school age children. Your goals start to get conflicted. So it gets a bit more challenging. You really start realizing that these kids are actually going to go to college and that you really need to actually have some money saved for them. You’re also reaching mid career and so you’re being pulled in directions for work, which can be challenging. And that requires vacation time to to get away for a bit as your kids get older. You’re starting to enjoy that vacation time, too. So you have these conflicting goals. So it becomes very important at that time to really have a goal focused financial strategy. And I can tell you what my family does. So, yeah, we have specific goals. I have a twelve year old daughter who’s going to go to college, no doubt about that. And my wife and I want to retire someday. So we specifically fund those goals. And as we’re getting older now, we we definitely and my daughter is having fun with us on vacation for now. So we definitely have some goals for that to to visit National Park. So we put aside some money specifically for those goals. So I call that like a goal based budgeting.

So where you’re you’re putting that money into the account design for those specific goals and then you can feel like, well, the rest of the money that you have coming in and outside of that is disposable income. And it’s really up to managing that on the day to day basis to make sure you’ve got, you know, that the bills paid and food on the table and everything else is really up to you as a family to decide. But you’ve got your goals paid for effectively. So that’s, you know, for that mid-range middle period and then fifth age 50 to retirement is really the conversations with the spouse or significant other is really about what do you really want to do in retirement? They think retirement starts to come a little bit more into focus. Where do you want to be? How do you want to spend your time? You really should start having those conversations because. That, in view of your future, is going to back into how much money you really need to have set aside to accomplish that, and then hopefully your kids are getting older and and and you might be becoming an empty nester. No kids in the house. And you can focus a bit more on saving and getting those goals a little bit more in focus on target. So those that’s the way I would kind of look at it from an age standpoint and what the focus should be.

Which Investment Accounts Should Families First Focus On?

Elle Martinez: Yeah, I definitely agree. And I love that the focus is, first of all defining the goals.

We’re kind of in the middle of it right now, we’re in our late 30s we have two little ones. And so are our goals are like you mentioned, going in different directions, two little ones preparing for the future. We’re also trying to save up and be wise and enjoy the time we have now with them. So it makes sense to make a plan.

I love that you said even before you pay the bills, [take care of] those important goals. You already set aside that money.

I think if you wait until the end of the month or until after everything’s been spent, you find out there’s not enough. There’s nothing at all. So I do appreciate that.

I know a lot of couples. They know what they’ve us to do. They signed up for the fall and can’t work or the fallen 3, B or whatever, you know, number and letter combination that’s out there.

There are so many different accounts. Could we kind of go over the benefits and the differences of the accounts that are typically offered at work, either raise and so forth?

Drew Snider: Yeah, I’d be happy to. Primarily the accounts that you’re going to be offered at work. As I said, most people are going to be offered a 401(k) plan.

Basically, you’re taking money directly from your paycheck and depositing it into a retirement account. It’s easy. Often there’s some sort of an employer match. So there. So your employer is helping you reach your retirement goal and then there’s often an option to do it either pre-tax or after-tax people. Maybe you hear that as the Roth option is the after-tax options.

Basically, when you’re deciding there is, do you want to pay taxes today on your income? Or do you want to pay taxes later? And really, that decision you should decide with working with a CPA or a financial planner to determine which is the best approach for you. I

personally just do a 50/50. I do half in my Roth for one day and I do half the traditional four or one K. So I’m getting some of the tax benefits today and then some of the tax benefits in the future. So the following K is the primary option for a lot of people. If you work for a nonprofit or a state organization, you’ll have the four or three B which roles are effectively the same.

They’re just under a different part of the tax code. They operate very similarly less likely to have a Roth option within the four or three B and then there are others various smaller plans if you work for a small company, but effectively they’re all kind of doing the same thing. They’re making it easy for you to choose to invest for your future. And within the plans you and you’re going to have choices of investments.

Almost every plan these days has what’s called a target-date mutual fund portfolio, which effectively is here deciding, OK, what day or year am I going to retire in the future?

If it’s 20, 30, then the portfolio manager is going to invest it in a basket of mutual funds, stocks and bonds that are geared for someone who’s retiring in 20, 30.

And over time, it’s gonna get more conservative, less stocks, more bonds, and that’s going to happen automatically for you. So all you have to do is show up for work, do a great job and continue to save money into the plan. And it should work for you over the long term outside of your four okay plan or outside of the company plan.

Looking at IRS. OK. And one thing to know is, is that if you are contributing or participating in a company plan, you are limited to putting money into a traditional IRA account and getting a deduction. So that’s something that you’re in. If you’re interested in saving outside of your own K plan, it’s important that you talk to a CPA or a financial planner to make sure that you’re doing the right thing from a tax standpoint and you’re not get trouble at the IRS. But the the Roth IRA is really the IRA that most people should be focusing on if they’re contributing to their Forum K plans or other work plans.

The Roth IRA Ray is a way to save money today where you don’t get a tax deduction by contributing today, it still grows tax deferred, meaning you’re not going to pay any taxes on the money as it grows.

And then when you retire at age fifty nine and a half or older and you start taking money out of the account, it comes out tax free. So what I encourage a lot of our members to do is to consider having some money savings in the Roth bucket.

And then in a traditional bucket so that when you hit retirement, you have some tax free income. In some of the income that you’re going to have, it’s going to be taxable. And that’s going to come from your Form K plan and the traditional IRA.

Elle Martinez: So you’re you’re trying to coordinate your different accounts to work well to get the tax benefits both now and in the future. That is correct. Yeah. OK. So that’s why it would be great to have an expert. Because when we file our taxes, I mean, they’re fairly straightforward.

But again, I wouldn’t know or be familiar unless I’m digging around with contributions and I need the requirements if you’re required contributing, you said to an employer versus a traditional IRA array. So it’s great having an expertise advice.

Drew Snider: One other thing I should mention is with the Roth IRA? You can be limited in how much you can put in there or put in there at all based on your income. No. That’s at another point where you need to talk to your financial planner or a CPA to learn if you can actually make that contribution.

How Spousal IRAs Work

Elle Martinez: Yeah, that completely makes sense.

I know I’ve gotten some e-mails. From members in the community, they had a question. Some of them have decided, like child care is expensive and at least for a few years, one of them is going to stay at home, either work part time or just focus on the kids for a few years. But they’re worried about like, how is this going to affect our retirement planning? I had sore about spousal are raised. How did how would that work? One spouse sat for a few years, was taking home, taking care of the kids at home, but they still wanted to make sure that their retirement accounts are growing.

Drew Snider: Good question. So as a non-working spouse, you can contribute to a traditional IRA or a Roth IRA. Based on your spouse’s earnings, everyone needs to have. If you want to contribute to an IRA or a Roth IRA, you have to have earnings in order to make those contributions to qualify as a non-working spouse.

You can qualify based on your spouse’s earnings as long as or more. The spouse’s earnings are more than the contribution you put in. If that makes sense. So if your spouse makes and we see this sometimes with older folks who are kind of semi retired but have some income. But in order to make a six thousand dollar a Roth contribution, if your spouse has to have six thousand dollars, that makes sense.

Finding the Right Financial Planner for You

Elle Martinez: We want everything above board we can, right? Yeah. Yeah. OK, thank you. That’s really important. We’ve kind of been discussing this about the benefits of working with a financial planner. You’re a certified financial planner? No.

For some couples, it seems intimidating. And sometimes they’ll tell me like I want to go. My husband doesn’t want to go or vice versa because they feel like we’re gonna be sold something versus actually getting advice.

And I look at your take, Drew, what are some signs, good or bad, that couples should look out for when they meet with a financial planner?

Drew Snider: That’s a good question. Yeah. I’ve been in that business as a financial planner for almost 20 years, and it’s changed a lot. And I think it’s changing for the better.

In that more financial advisers are taking a planning approach, which means that when you sit down to meet with them for the first time, they should be talking about your goals, not your family. Learning about you and what you are trying to accomplish, what your pain points are, what your concerns are.

And then from there, they really should be taking a more personalized approach to figuring out how to solve those problems for you. And I can tell you, a coastal, that is definitely what we do. That’s precisely why I have the job that I have, is so that when a member comes in and meets with one of our seven financial advisors, they know that they’re going to be asking them lots of questions.

Be prepared for that to learn about them and their family and understand what they’re trying to do and then working with me. I do kind of the work behind the scenes to make sure that we’re covering all the bases. We’re looking at their tax situation.

We’re making sure that they have appropriate insurance coverage. We’re making sure that their estate plan is complete. You know, they’ve got a will in place. And then we might start talking about investments. And if their investment strategy is appropriate to reach the goals that they’ve set out for us and we start with creating a financial plan for them. So if you meet with a financial adviser and they start talking to you about investments right away and products that they can put you in, you should be concerned, honestly, because they haven’t learned enough about you to make those recommendations. I feel like the advisors here, coastal entity, really good adviser in twenty nineteen should be taking the time to learn more about you before they’re making investment recommendations.

Elle Martinez: That makes complete sense. Yeah. And so I know this has happened to us in the past and I’ve heard people’s back and something that they’re scared of talking with advisors, they feel like. Well, when I was starting to ask questions, the person felt challenged because they were putting me in these vestments and then they were saying I was the expert. You should trust what I say. You as a financial planner. And you knew seeing how your team works and when they meet with the clients. How how did they feel if a client does not push back but ask questions? Dig around is fine with that or is that encouraged? How does that work?

Drew Snider: Oh, that is definitely encouraged. I mean, we want people in investments that they’re comfortable with that we together agree upon is going to help them reach their goal. So just as an example, you know, we’re going into a financial plan for somebody and we’re going to realize that, you know, based on their risk tolerance and the goals that they’re trying to accomplish, that they may need only a 4 or 5 percent rate of return on their investments to be reached there. Their objective? Whether it’s for college or retirement, but also still feel comfortable about their investments. So if they come back to us and they say, hey, I am I’m not comfortable with what happened with this, whether the investment didn’t perform well or if it lost money during some sort of a correction and that kept them up at night, that we need to make some changes to that. We’re definitely open to that. We want you know, but we’re going to tell them, you know, if we make that adjustment, this is the impact it’s going to have on your financial plan over the long term. So we we don’t have a lot of those conversations, I’ll be honest with you, because I feel like if you’re doing the work up front.

Yeah. To understand someone’s goals and their risk tolerance and what they’re comfortable owning inside their portfolio, then typically you don’t have those conversations. Now, what can happen is people’s risk tolerance changes. They think they’re more aggressive than they really are because they become complacent and comfortable with what really what we’ve had for good 10 years is a rising market. And so a lot of people feel like, you know, they’re pretty comfortable with that. We haven’t really had a big correction in a while. So, you know, we anticipate people changing their risk tolerance when we go into a recession and there is a market slump. But, yeah, we’re we definitely want to talk about that for sure. And I think we see ourselves as partners with our members and making investment decisions. We’re not telling them what to do. And that’s in my opinion, that’s really another red flag. When you’re meeting with somebody who’s last minute buys, is it they’re telling you what to do rather than you doing it together? Chances are they’re putting them in an investment that they’re comfortable with that maybe you’re not comfortable with.

Elle Martinez: Yeah, I’ve I’ve had quite a few that got taken in with an investment and they couldn’t explain what exactly it was. So definitely that’s a big red flag. So thank you. I mean, it’s it’s good. It’s kind of like I see. Going to a financial advisor, almost going to a doctor. Of course, the doctor is the medical expert. You want them to be like on top of everything. But it really does. Hey, to be very aware of like your health habits, your routines have that basic knowledge. So you can’t ask the question. So you feel comfortable working like you mentioned being a team member for your health. So, you know, that’s physical health, but also for your financial health. So. Right.

Drew Snider: We do see ourselves that way. It’s kind of like your financial doctor, for sure.

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Music Credit

Like the music in this episode? Music is by Lee Rosevere and Music for Makers.



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2 comments add your comment

  1. I would love to listen to these podcasts on the Pocketcast app. I am not able to locate any uploads from Simplify and Enjoy. Is this a problem anyone else is experiencing? Thank you

    • Thanks for letting me know Tim! I manually added it. I checked on my app and it is available through search function!