When it comes to the complex and occasionally confusing world of finance, it’s sometimes best to turn to the experts. Especially when preparing for your future. We chatted with two local gurus to get their expertise on investing and retirement planning. Here’s what we learned.
THE 411 ON YOUR 401(K)
When Mario C. Giganti speaks with university students about the future, he has one big piece of advice: If you do nothing else at your first job, put 10 percent of your income into a 401(k) plan.
“Then, don’t ever worry about it,” said Giganti, president of Cornerstone Capital Advisors in Uniontown.
The rule of thumb in financial planning is to save about 10 percent of your paycheck, he said.
It’s important to establish those savings early when you have more disposable income. Once you get married, buy a home or start having children, that extra money starts shrinking.
“Trying to put 10 percent in later is hard,” he said. “If you start early and never change that, you never miss it. It becomes a habit that’s automatically done.”
For those who didn’t establish a 401(k) early on, or who can’t afford to invest the full 10 percent, Giganti advocates the 10-1-now principal. Right now, put in as much as you can—even if it’s just 1 percent—and every year you get a raise, increase that amount until you’re contributing the full 10 percent.
And if your company offers a 401(k) match, be sure to invest at least that minimum match amount.
Folks in less traditional jobs—those who own their own businesses, for example—have several options, including a solo 401(k) and profit-sharing plan he said.
In those scenarios, it’s probably best to consult an expert.
No matter how much you’re able to invest, it’s important to start as early as you can to take the most advantage of compound interest, Giganti said.
It’s also important to leave your money alone.
Giganti has noticed that when younger folks switch jobs, they tend to cash out their 401(k), pay the penalty and spend the money.
Sometimes they cash out for good reasons, but it’s generally a bad idea, he said. “That nest egg only works if you keep money in it.”
A more positive trend is happening in the world of retirement planning: more people leaving the hard work to the professionals.
“The less you mess with it, the better,” Giganti said, adding that unless you’re a trained investment advisor or certified financial planner, you shouldn’t try to outsmart the market on your own.
Giganti urges his clients to think realistically about the future and not shy away from hard conversations.
You should view retirement savings as building a “paycheck manufacturing company,” Giganti said.
Everyone needs to figure out what their own number is—the amount they need to retire and live comfortably. Then they need to find a way to get there, he said.
For some people, that number might be unattainable. But that doesn’t mean anyone should give up and stop saving; a little money is much better than none, Giganti said.
You also need to plan for the possibility of never reaching retirement. Many people aren’t carrying enough life insurance, Giganti said.
Regardless of age, people should sit down with their spouse and plan for the worst.
“(People) don’t want to think about life without a spouse. It’s the first time they’ve thought about it,” he said, noting that people tend to avoid the life insurance talk. “It’s emotional but necessary.”
INSIGHT ON IVESTMENTS
Many of Mandwel Patterson’s clients are baby boomers, but investing really is for everyone.
“I always tell people that anybody can do it, they just have to be committed,” said Patterson, a financial advisor with Edward Jones in Canton. “The most important thing is not the investment itself but being committed to developing a plan and sticking to that plan.”
The first step of investing is establishing a goal—whether it’s paying for your kid’s education or buying a new truck on your first day of retirement—and a time frame, he said.
Once you’ve got your goal, you need to meet with an adviser to map out a plan.
Then comes the more difficult part: committing to it.
Successful investing requires the discipline to stick with the plan, he said.
A good financial adviser will be there to navigate the ups and downs of the market and keep you on course, he said.
“Most of what I do is behavioral consulting. I manage their emotions more than I manage their money.”
Investing also requires some education.
The average person, without a background in investing or financial planning, shouldn’t try to take on the market solo, Patterson said.
Even those who work with a financial adviser can be in the dark about their own investments or why their broker makes a certain decision.
An adviser should teach you about your investments and the reasoning behind them, Patterson said. “The more educated you are, the less fear you have.”
Investing is always on an individual basis: Because everyone has different goals and a different tolerance for risk, there’s not a one-size-fits-all plan, he said.
And everything involves at least some risk.
“The safest investment, of course, is no investment,” Patterson said, laughing.
For the more risk-averse, your safest options likely are investments outside of the market, such as bonds,
An adviser can’t guarantee what will happen to your money because they can’t guarantee the market, he said. “I can’t tell you what it’s going to do tomorrow, and I can’t tell you what it’s going to do five years from now or 10 years from now.”
In most cases, it all goes back to the plan, he said.
“Get a plan in place,” Patterson said, adding that if circumstances change, the plan always can be modified.
“Most people spend more time planning their vacation than they do their retirement or their kid’s education or their future.”