Start Early On Asset Accumulation

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OCEAN CITY — While everyone’s needs are unique, specific topics typically resonate with individuals at specific stages in their lives and careers.

Your financial success can depend heavily on planning and making informed decisions about your money during each of these life stages.

Over the next few weeks, we take a look at some typical challenges and suggested action steps for each life stage. This week we start this series with, “Starting Early & Asset Accumulation”.

The "Starting Early & Asset Accumulation" life stage typically occurs in your 20s and 30s.

Starting out with smart planning can help you lay the foundation for the rest of your financial life. As you move from your 20s into your 30s, your focus can shift to asset accumulation. Consider these points:

1. Contribute to your 401(k) plan: Even as little as 1% to 3% of pay can make a difference due to the potential power of compounding over many years.

2. Roll over 401(k) assets when changing jobs: If you change jobs, roll over your 401(k) assets to your new employer’s qualified plan or an IRA. "Cashing out" when you change jobs would send you back to the starting line.

3. Build other savings: Start with an emergency fund in a separate account, and save a fixed amount each payday until you reach your goal. Many experts say you need enough to cover at least three to six months of living expenses.

4. Create a budget and minimize debt: Budgeting helps you see what you can afford and where you need to cut back. Without a budget, it’s easy to get into debt, and not so easy to get out of it. And make a plan for reducing any current debt, such as college loans.

5. Shift your focus to asset accumulation: As you move from your 20s to your 30s, you may shift your focus to asset accumulation. This is a time for assessing your situation, increasing contributions to your 401(k) and saving for other goals outside the plan.

(A Merrill Lynch Wealth Management Advisor. She can be reached at 410-213-8520.)

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