End of Employment Money Wrap-Up

As I wrap up at my current employer and get ready to head back to school, I’m having to learn a lot about the loose ends of my finances as well. I’m rolling over my current 401(k) into a Traditional IRA account – which will be taking a considerable hit, given that I’m giving up the unvested portion (which is currently $5,068) – and thus setting the foundation for all future company retirement plans that I might begin and rollover.

Also, I had 10 random shares of company stocks that were given to me as an award. (As of today, worth somewhere between $580 - $600). I’ve had to go through multiple calls with company HR representatives to have them tell me that I need to contact the designated Shareholder Services company to actually set up an account before I could do anything else. Conceivably, because I don’t have a broker I could hand them off to? Anyway, all of this made me realize just how easy it is to have money lost out there in the ether.

I’m very tempted to cash out the 10 shares completely, so that:
#1) I won’t have random unaccounted company shares hanging out there
#2) the stock is pretty high vs. where we’ve been tracking the past few years, so I’m not convinced keeping my money there is going to provide some hefty return, and
#3) so that I can partially fund the purchase of a new computer for business school without jacking my student loan bill any higher.

All very tempting rationales…. More to come on this!

The 10-10-10 Principle

In cruising around the blogosphere, I stumbled upon Dave Ramsay’s 10-10-10 principle. And being just the type of person to cherish any kind of arbitrary, if firm principle, I immediately rushed to check myself against his. And found myself… yes, lacking.

The Principle is based on the notion of saving 30% of your income… 10% to retirement, 10% to an emergency fund, and 10% to saving for future fun purchases. I only made the cut on retirement.

Me:
__ 6% Pretax +8% Post-Tax for Retirement
__4% Post-Tax on Emergencys
__4% Post-Tax on Fun future purchases

I also save about 6% on a cash-value life insurance policy which I’m using as a mid-term investment (kid’s college one day, far far away I imagine), which doesn’t fold into the 10-10-10 principle as described. So all in all, if I included this as well, I think I would just need to increase my savings to another 6% to meet the full criterion. But starting small, as I usually do, it will be my goal to move my Emergency Fund Savings up first. If I can move my automatic withdrawls up another $60, I will move it up 2% there!

Evaluating My Portfolio of Assets

So, I did it... I took the plunge and upped my automatic savings by another $100. I decided I would increase my cash-value life insurance contributions so that I can hopefully cover this no problem, even when I'm in grad school. I think I may even be able to do more... but I want to wait it out and see.

The one blessing of not having a lot of money in these times, as I told my advisor yesterday, is not having to worry so much about the right balance of your portfolio. When you only have a little teensy bit in the market, there’s just not that much nuance you can introduce. But for the future, I do want to re-evaluate my entire portfolio of assets and get a sober assessment of the right balance. I recently found a quick list of resources to help you do just that on your own.

Step 1: Break down all of your assets into three major categories; stocks, bonds and cash.
Step 2: Use Morningstar’s free Instant X-Ray tool (Morningstar.com/goto/instantxray) to display the assets in a pie chart.
Step 3: Decide your target allocation and shift from investments you’re overweighted in to those you’re light on.

Rinse and repeat annually. I think the categorization will be enlightening for me for instance, because often, even when I have my money in many different places, they all might fall into the same category.

Vesting 401(k) Quandary with soon-to-be "Former" Company

Doh. Truly a Homer Simpson moment for me today. When I was checking my company-held 401(k) balance the other day, I suddenly had what shouldn’t have been a shocking revelation. There were two little lines there.

Current Balance: $12,765.66
Vested Balance: $8,658.28

Suddenly the financial-speak scales fell off and I saw what it meant for me:

Vested Balance: my money
Current Balance: NOT my money YET

Somewhere the HR aside of a “5-year-vest for company matching funds” came trickling back into my ear. Oops. I do plan on leaving this company when I go to business school. And that will mean walking away from, at this point, $$4,107 of what would have been my money. Certainly not something that would sway my decision. In fact, because my company will sponsor me for business school if I so choose to come back for three years afterwards, I will in fact, probably be walking away from $10,000+ dollars (when I subtract the difference I’d probably get in financial aid anyway). But I will never let money make choices for me that could make me much less happy in the long run. And that’s the point of money anyway, right? Allowing you the freedom to do the things that make you happy.

Now that I’m on the subject though, I’m wondering if, knowing now that I won’t continue with the company (I wasn’t sure of this when I first enrolled in the 401(k) plan of course), if I should lower my contribution on my work 401(k) and put more money into the Roth. I didn’t invest the maximum contribution last year, although I might come closer this year. Seems like a reasonable thing to do… just to make sure I’ll contact my advisor. But if anyone has made a similar choice – please leave me a comment!

The Perfect Storm

I haven’t been writing a lot lately. But suffice it to say, that along with everyone else, I hold my breath before I flip on CNN in the morning. What will have gone broke and broken in the night? Who knows. It’s hard to even stay engaged or to know what to do. It definitely is the “perfect storm” of investor anxiety. In the end, I am still resolute to stay still in the 401(k) plan I have as well as my Roth. So far, I haven’t seen anything get too far off… and I still have decades before I’d be retiring. So I’m staying put. But it’s still pretty satisfying to peruse advice and resources on fortifying your 401(k) – like this kit of articles from Forbes. Just a nice triple check to make sure you have the same piece of mind.

Equities vs. Dollar Balance

Considering market downturns, other pf bloggers are encouraging me to think of my retirement assets as a certain number of shares rather than a constantly fluctuating (or diving) balance – hopefully this will help take the emotion out of re-looking at how I’m doing, when I have a long way to go before retirement. With that, I’ll start keeping this tracker in addition to my net worth tracking.

# of Equity Shares:
Company 401(k): 112
Company Stock (Given as extra incentive/gift): 10
Roth IRA: 107
Total: 229

401(k) Matching = Free $1800!

Since my company did pretty well this year, they knocked up the extra 401(k) Match a bit. They have a base matching program of $.50 on the $1, and a variable matching program depending on how well the company does. So based on this year’s performance they threw in another two quarters, and they are now doubling the amount I contributed to my 401(k) this year. The variable match amount for this year came to $1800, which has brought my 401(k) total in my company 401(k) up to $13,538. Thus far, I haven’t focused on a numeric goal for either this or my Roth account. At my company I’m contributing the maximum for matching (6% of my pre-tax income), and I’m contributing $250 a month for the Roth (8% of my takeaway pay).

Not interested in setting a numeric goal for myself – just too damn far away. Who knows what cataclysmic, world-altering events could take place between now and the time I retire. But, I do want to find some general, authoritative principles for retirement goals. Is 6% & 8% just about right? Too little? More than I really need? Because I would love to squirrel more away against my other savings goals too… In my preliminary googling, I haven’t come up with any percentage principles, so I’m going to do a deeper dive.

The only principles I’ve found are to max out each year. Last year I fell short of maxing out my Roth by $1200 so a ways to go – maybe this year, my goal should be to max it out. Does any one have a good rule of thumb for what percent of your income you should be contributing to retirement each month?

Dividends are a girl's best friend.

Filed my taxes this morning! Check it off! It felt good to get up early on a Saturday and get something accomplished.

Also, just caught wind of this female-investing-focused online resource from Citi called Women & Co. – it seems to be primarily retirement-focused, which was disappointing to me… I realize most people don’t have financial panic attacks until they start thinking about retirement, but there are so many other important aspects of financial freedom and wealth management. If you happen to be a Citigold customer or a Smith Barney client, you have a free membership, so let me know if anyone checks it out. I won’t be paying the $125 annual membership fee to join on as a non-customer…. must be some really value-added advice.

But what really caught my eye was the print ad creative: “Dividends are a girl’s best friend.” Too cute.