Now you're getting along in your career and things may looking up for you. You hopefully are saving for retirement and paying off debt. Now its time to sit down and make sure you are still on your way to your financial goals as your life has inevitably changed. Here are a few things to keep in mind and precepts to investing at this point along the way.


Revisiting Retirement Goals

Early on in your career you were just trying to get started on your way to retirement. Now that you have been on track for some time, put some more details into your plans. For one, you can now more accurately estimate how much money you need to sustain the lifestyle you dream of during your retirement years rather than shooting for an arbitrary number. I can't tell you what that number is but to get a good idea you can calculate how much money you spend to 'live' each year now and how long you expect to live after you retire. 

A general rule of thumb is that a retiree that expects to live another 30 years after retirement should expect to withdraw 4% of their retirement funds a year to pay for expenses. This is a reasonable estimate to live comfortably. Whatever that number is, it will need to grow if you plan to do some traveling or any type of adventure while you are free from work.

So now is time to reflect on your current financial state and your spending and saving habits. This includes reevaluating your current tax bracket to ensure you are putting your money in the right type of TSP(Traditional/ Roth). There are more details on that in the Early Career page.

Also check on your debt vs. savings. At this point you've either paid off some debt or added some on as your life developed. So sit down and be honest with yourself whether you can you afford to add more to your saving or do you need to catch up paying off high interest debts.


Investing

Hopefully your TSP has grown over the years and you've accumulated a reasonable amount. If you are in your forties your should ideally have three to four times your annual salary saved up and your saving should be on an upward trajectory.

At this point most professional investors recommend to gradually lower the risk of your investments so a downturn in the market is not devastating on your retirement goals. This means moving some of your savings out of stocks and more into bonds. Ideally around 60% stocks and 40% bonds allocation. If you are invested in the relative Lifecycle (L) fund for your estimated retirement year this will happen automatically. 

I gave some details on the Lifecycle (L) funds the TSP offers on the Early Career page. There are more details on TSP.gov if you want to explore possible allocations that fit your risk tolerance.

These investment ideals are the precepts for investing that are commonly recommended for mid-career investors. However I highly suggest doing your own research and to invest in the way that best fist your situation.


Thomas A Crowley


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