Stop #3 on Our Financial Road Map: Investments and Financial Goal Setting

For our third installment of our path to Finding Financial Wellness with Cape Cod 5, Jim introduced us to Kimberly Williams, Vice President and Senior Wealth Management Officer. Kimberly walked us through the basics of maintaining and embracing long-term financial wellness.


The first step on Kimberly’s list is a gentle one: setting savings goals. Whether short-term or long-term, pick a couple and break them into smaller milestones and celebrate along the way. For example: six months savings is a worthy long-term goal, but one that will most likely take a few years. Starting toward $1,000 in an emergency fund offers real peace of mind for many unplanned expenses and a sense of accomplishment, encouraging you to keep going!


Short-term & long-term goals:

Image Credit: iStock.com
  • Emergency Fund: Six months of living expenses

  • Rainy Day Fund: For unplanned expenses such as car repairs and medical expenses

  • Pay Off Debt: A dollar (of interest) saved is a dollar earned!

  • Retirement: Work plans, Traditional IRA, Roth IRA

  • Major Purchases: Car, home, vacation, wedding

  • Education: College savings, 529 Plans

  • Health Needs/Long Term Care


Remember, not everyone’s goals are the same, and not everyone’s time frame for achieving goals will be identical! It’s important to tailor your goals and timeframes to fit your own life and pair them with realistic expectations and plenty of pride along each step of the way!


If you’re hesitant about how to begin stashing funds away for your goals, Kimberly recommended first choosing one or two things on your list that are most important to you to focus on. Remember - big pieces of time are needed to achieve big goals.


Take a look at one week of spending - where can you slim it down? Bottled waters? Buying lunch? Take-out dinners? Sell items no longer needed? If you take small bits out of everyday spending, be sure to make it a collaborative challenge that you and your partner, family or friends can do together!


The next step on our path to long-term financial wellness: the basics of saving for retirement. It is important to remember that retirement plans are often a form of investing. - investing involves taking a certain amount of risk, and it also involves the desire to multiply your money over time. Planning your investment strategy is about discipline and patience. Additionally, we must all consider our personal timeframe, personal feelings about investing, and expectations for the future. As you can see from this chart, you can also benefit from a long-term time horizon.


Image Credit: BusinessInsider.com
Image Credit: BusinessInsider.com

If you start investing when you’re young, compounding (basically getting interest on top of the interest you’ve earned already) will help grow your nest egg fairly quickly. A typical 25-year old would need to save $500/month to accumulate $1 million at age 65. If he/she waited until age 35, it would be nearly double that. If he/she waited twenty years, it would be over 4x that amount. It is a snowball effect, the longer your roll (or wait) the heavier and bigger the burden. As we get older, our expenses also increase with homeownership and children which makes it even more important to save while you are young! Kimberly assured us that even though it may seem like an eternity away, now really is the time.


So....what are some of the steps that we might be able to take right now to help us work on our retirement funds?


For those of us with a employer-offered 401k, 403b, or 457b plan, check with your company’s benefits coordinator to learn ways that you can contirubte more towards your retirement. You should also review asset allocation and beneficiaries annually!


If the above programs aren’t available through your employer, or a partner or family member is interested in retirement funds without the typical employee-offered route, looking in to a traditional IRA or Roth IRA can be beneficial in many ways:

  • Contribute up to $6,000/year (2021)

  • Traditional: Tax-deductible but pay taxes at withdrawal

  • Roth: Non-deductible but withdrawn tax-free

  • Tax-deferred growth

  • Non-working spouse can contribute

  • Wide range of investment options

  • Income limits apply


Now we look at every parents fear: The dreaded college tuition bills!! This fear is a little bit more short-term than their own retirement. For this goal, a 529 plan is often the most sought-out. Some of the benefits of a 529 plan include:


  • Tax benefits: Contributions grow tax free, and qualified distributions are withdrawn tax free. While there are no federal tax deduction for contributions; state tax deductions may be available.

  • Grandparent benefit - grandparents are able to make regular contributions or even open a 529 plan for their grandchildren if they’d like to!

  • Many investment options can be available, and systematic contributions will help funds grow over time - think birthdays, Christmas, or regularly coordinated, small amounts that won’t impede on everyday life.

  • Financial aid eligibility may be modestly impacted under different ownership structures, which varies with each provider, but financial aid shouldn’t become majorly impacted by these assets.

While retirement plans and college savings tend to be more long-term investment goals, there is a way to make short-term investment goals as well. To do this, Kimberly explained Micro-Investing - digital applications are available to help you save or get started with investing. These Apps set you up with micro investment accounts, and money is gained when you allow them to round up your purchases and shift the excess funds to an investment account that you establish. All that excess change from the spare cup in your car can go further for you with this form of everyday investing.


The final item on Kimberly’s list was another form of everyday investing, with a more medical feel: the HSA or Health Savings Account. These are employee-sponsored programs typically offered on tandem with higher-deductible insurance plans. If you’re unsure whether your employer offers such plans or if you’re currently enrolled, always check with your HR department or benefits office! Some benefits to an HSA include:

  • Contributions are made with pretax dollars, and your employer may contribute to your balance. Interest is earned on your balance and is tax-free.

  • Tax-free withdrawals can be made to cover qualified medical expenses now or later in life, including health insurance premiums. Many HSA programs have a website or customer service phone number to call to help determine if an expense can be covered with HSA funds.

  • Funds can be invested after a threshold is met, and continue to generate more money for you.

  • At age 65, withdrawals can be made for non-medical purposes and only be taxed at ordinary income rates

We’ve been so lucky to be able to have such amazing help from the team at Cape Cod Five to guide us on this roadmap to financial wellness! It’s always important to remember that everyone’s goals are as unique as they are, and that any triumph deserves some celebration!


If you would like to watch the presentation, follow this link to our YouTube Channel.


"You don’t have to see the whole staircase, just take the first step"

– Martin Luther King, Jr.

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