8. Be prepared for the unexpected.Someday you may lose a job through no fault of your own. Prepare today by stashing money into an accessible
emergency fund. The easiest way to do this is to automatically divert a portion of your earnings into a savings account in addition to the amount you're contributing to a
401(k) plan or IRA.
Try not to use that
401(k) money for emergencies. It will cost you plenty, between income and penalty taxes. For instance, if you have $10,000 in your account and you're in the 25-percent tax bracket, you'll lose $2,500 to taxes, plus pay another $1,000 penalty for breaking into the money before you reach age 55. (For IRAs, the early withdrawal penalty applies up to age 59½, with certain exceptions.) Bottom line: Your $10,000 dwindles to $6,500. Worse, you will have lost the opportunity for that money to compound and build wealth for your retirement.
But don't leave that money behind with the former employer either, lest you
lose track of it. Instead, in a trustee-to-trustee transfer, roll it over into your new employer's plan or into a rollover IRA.
9. Learn about investing or hire help. It's not rocket science; in the beginning you just need to
overcome fear and select one or two good, cheap mutual funds. Ask the human resources department for help with that. After you've amassed some wealth, it may be time to hire someone. If you do, you will obviously have to pay for the service. Get referrals and then check out the qualifications and credentials of a prospective
financial adviser or broker.
Make sure you understand the fee structure of the services. Is it commission-based or do you pay an hourly fee or a percentage of assets or some combination of these fees? Ask for a complete breakdown. Also, check with the appropriate authority to see if any disciplinary actions have been taken against a
certified financial planner or
broker before you initiate contact. The Financial Planning Association's Web site is a good starting point to search for a
10. Be thankful for your good fortune. It's not all about money. If you work at it, you will have abundance -- through strong family ties and solid relationships as well as monetary assets. Take some time out each day to reflect on the good in your life. Spend at least one day a week in a recreational activity or hobby that you enjoy, and take a minimum one-week vacation annually if you possibly can. My aunt Genie advises that you travel throughout your life, rather than waiting for retirement to do it. Again, save for the trip.
If you have children, spend as much time as you can with them when they're still young and dependent on you. Before you know it, they'll be old enough to get a driver's license, and you'll see less and less of them from that point on.
Longtime financial journalist Barbara Mlotek Whelehan earned a certificate of specialization in financial planning.
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