Navigating these Challenging Financial Times

Spotlight: Jonathan Tudor

Workplace Financial Consultant, Certified Financial Planner™ - Fidelity Investments

Maximizing your Savings and Preparing for Future Needs

MGB benefits offers access to Fidelity workplace financial consultants for investing and retirement planning. For this feature, we spoke with Fidelity  consultant Jon Tudor, who shares some general tips on maximizing savings and preparing for the future. You can adapt these tips to your unique financial needs and circumstances.

Jon suggests that approaching finances now or in any economic climate or market environment should always be guided by the same core principles and strategy.

Emergency savings are priority # 1

• At baseline, before investing anything, you should have 3-6 months of living expenses in cash
• Put money aside over time to maintain an urgent needs fund
• Be prepared for an unexpected home or car repair, or time off from work for a health issue
• In some cases, borrowing to pay for an emergency may be necessary if you don’t have financial reserves to cover it. Consider all your options and if you need to borrow, make sure to keep interest rates as low as possible

On a related note, take measures to care for your dependents: One of your biggest assets is your future earning capacity. Consider reviewing and updating your insurance portfolio, including disability and life insurance. Here is some information from MGB.

Balance paying down debt versus contributing to your savings

How you approach debt will depend on the type: “good” or “bad” debt.

• Good debt: student loans or mortgages are often in the good debt category, because they carry low interest rates, possible tax benefits and can enhance your credit score. Make minimum payments and lean towards saving versus paying down more debt in these cases
• Bad debt: Be more aggressive with loans with high interest payments, such as some credit cards, car, or personal loans. If you have debt with a 6-7% (or higher) interest rate, then consider paying this off before adding to retirement savings

Save at least 15% for retirement and invest based on your personal situation

Jon suggests having your savings invested, whether you are 10 or 30 years from retirement. It’s normal to worry about the markets and it may be tempting to make a move to protect your assets. However, Jon explains that market fluctuations are going to happen, and that history bears out that the markets weather storms in the long-term. Timing the market to predict the bottom and know when to get out and when to get back in typically represents more risk than staying the course. As a caveat, investing involves risk and even the risk of loss.

What can you do to feel more secure with the reliability of your retirement plan?

• Make sure your investments are aligned with your goals
  Do you have the right combination of asset allocation (stocks, bonds, cash) for your age, expected retirement timeframe and current financial situation?
• Be appropriately invested for your life stage
  Make sure you are in a diversified portfolio with guard rails, which reflect your life phase, needs and expected retirement date. As a default most MGB employees are in these types of funds via our investment providers
  – If you are close to retirement: your investments should be in a less risky portfolio. This translates to less international stocks and a 50-50 or 60-40 stock-to-bond ratio
  – If you are further from retirement, you can afford to be more aggressive and accommodate greater risk with your investments
• Educate yourself and be goal-oriented
  – Take the time to learn about the target timeline and risks for each one of your accounts. Even if you are not doing your own investing, it might alleviate some of your financial worries if you fully understand the options and confirm that you are in the right type of account(s) for you. At a minimum, you should you review your investment account once a year
  – Meet with a  workplace financial consultant at one of our MGB retirement providers or through wherever you have investment accounts
• If you prefer to manage your own investments
  – Use a financial retirement calculator 
  –  Compare programs with different allocations and target rate funds
  – Utilize MGB financial vendors for consultation and take advantage of their educational materials. For example, this recent post from Fidelity offers tips for navigating volatile markets