Tsou, 35, enjoys her career as a
research-and-development engineer for a
medical-equipment maker in the Seattle area. Other than
the mortgage on the 1928 home she shares with her
longtime boyfriend, she has no debt.
donít live above my means," she says.
yet, despite eight years of making the maximum
investment in her 401(k), investing in stocks, setting
aside cash, and this year launching a Roth IRA, she
wonders if her financial picture might need
re-engineering. Born to a family of savers, she wonders
this: Is she saving enough?
want to make sure Iím going to be OK in
retirement," she says. "People donít think
about how long theyíll live. What if I live to be
an expert opinion, she completed an online survey to
participate in a free financial makeover from a member
of a local chapter the Financial Planning Association.
was paired with Lee Martin, a certified financial
has saved more than $540,000 in a mix of cash and CDs,
stocks and funds at multiple brokerages, and retirement
accounts. Factoring in her mortgage balance and homeís
estimated $401,000 value, her net worth is currently
way ahead of the curve for someone her age," Martin
says of her portfolio. "Sheís got a genetic
disposition to save."
living frugally, setting aside anywhere from $400 to
$700 each month from her six-figure annual salary, and
paying extra principal each month toward her 30-year
mortgage (which sheís on track to pay off at 50), Tsou
has a sizable nest egg to help prepare her for
has invested about $145,000 in cash and CDs and about
$203,500 in stocks via multiple self-managed brokerage
eight years she has made the maximum contribution
possible into her employerís 401(k), which is employer
matched, and now has slightly over $194,000 there. She
has begun contributing to a Roth IRA, and has just over
at her asset mix, Martin said he was struck by how
liquid her portfolio is, which is unusual for a person
cash savings and CDs are accessible in the event of
emergency, and the stocks and funds she owns in
brokerage accounts can also be sold in relatively short
order if the need arises.
has more than 40 percent of her assets in cash, Martin
notes, yet with expectations that she will remain in a
secure job with a stable income she could reduce this
percentage to the 10 to 15 percent range.
suggested that for simplicityís sake and to lower
management fees, she shorten the list of brokerages
where she trades equities, and then, with respect to
allocation, that she consider moving more of her
investments into large-cap stocks or funds
representative of her high risk tolerance.
historical data as a basis for his estimates, Martin
forecasts that by shifting her portfolio into a slightly
more aggressive allocation, she could achieve a ballpark
8 percent annual return versus the 6 percent return
estimated for her current investments.
Tsou has a substantial and growing mix of assets
invested in taxable stocks and mutual funds, she may
want to consider investigating whether she can move some
of her money into similar stocks and funds that will
create lower tax impacts, Martin says.
this isnít an issue on Tsouís tax returns now, if
capital-gains tax rates rise over time, she could face
increased tax liability in the future.
that reason, Tsou would be wise to continue building her
balance in her Roth IRA, which will allow her to
withdraw money tax free in retirement.
Martin recommends that she investigate municipal bonds,
municipal bond funds, or tax-efficient mutual funds,
which can help offset taxes.
recommend against people specifically planning around
tax issues," Martin says. "But in Jeanís
case, this may need to become part of year-end tax
planning as time goes by."
tax impacts are a concern, he notes, investors may want
to house dividend-paying stocks or equities in IRA
accounts and stocks and equities that donít pay
dividends into taxable accounts.
said she was relieved to learn she could retire at 65 if
she wants to ó and that spending more money on living
expenses or leisure than she now does might also create
some tax advantages.
Martin says, she could possibly retire at 50.
time passes, she will want to make sure to complete her
will and to consider an estate plan that reflects her
desire to provide for her significant other and family,
but for now she needs to maintain the good savings
habit, Martin says.