Published January 2005

Plan your investment
moves for the new year

Each new year, most of us vow to improve one aspect or another of our lives. However, we don’t always rush to carry out our resolutions. But if you’ve promised yourself that “this is the year” that you’re really going to stay on top of your financial and investment situations, you’ll want to get started now.

Begin by reviewing your family and career circumstances. Will there be any significant changes in your life in 2005? If so, they almost certainly will have an impact on how you save and invest. Consider these factors:

• New child — If you’ve recently added a child to your family, or you plan to add one in 2005, congratulations! You have a lot to be happy about — and you also have a lot to protect. Make sure you have enough life insurance to help raise and educate your child, should something happen to you. Also, it’s never too soon to set up a college fund for a child, so you might want to open a Section 529 plan or a Coverdell Education Savings Account.
• Child heading to college — If your child is heading off to college in the fall of ’05, it’s time to put your college-funding strategies in high gear. Now that it’s past Jan. 1, you can complete the Free Application for Federal Student Aid (FAFSA) at www.fafsa.ed.gov. Also, you may want to shift some assets from your child’s name to yours; colleges typically expect students to contribute 35 percent of their money toward college expenses — but you are required to kick in only around 5.6 percent. And you’ll want to contribute as much as you can to whatever investments you’ve designated for college.
• Salary increase — Are you getting a raise this year? If so, try to invest at least part of it. For example, you may want to increase your contributions to your IRA or 401(k). Both these retirement-savings vehicles offer tax advantages and a range of investment options. Furthermore, both have higher contribution limits in 2005, so even if you “maxed out” your retirement savings accounts last year, you can put in even more this year.
• Retirement — If you’re planning to retire in 2005, you have many issues to consider. You may need to take distributions from your employer-sponsored retirement plan or IRA. You also might have to decide whether you should begin accepting Social Security. And you’ll want to ensure that your investment portfolio is properly balanced for your retirement years. Keep in mind that you may enjoy a healthy, active retirement for two or three decades, so your investments must provide you with growth opportunities as well as current income. Your investment and tax advisers can help you determine the best moves to make as you enter retirement.

Start the year off right
Get off to a good start in 2005 by making sure your financial plans match what you need and want to accomplish, both now and in the future. Doing so may be the most important New Year’s resolution you make — and it’s one you’ll want to keep.

Eric Cumley is a Certified Financial Planner and investment representative with Edward Jones in south Everett. He can be reached at 425-353-2322. Edward Jones is an NYSE-member investment firm with more than 9,000 offices nationwide.

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