Retirement Plan Update, Q1 2024

Market Recap:

Markets enjoyed a strong start to the year, building on momentum from the last couple of months of 2023.  The rise in many stocks is due to more optimistic assessments about economic conditions for this year on top of high expectations for growth in the technology sector.  Bond returns have been relatively flat as expectations for interest rate cuts have softened this year, but investors continue to enjoy good income from these assets.  Given the extreme rise of stock prices and valuations over the last 5 months, it would not be surprising to see an increase in volatility at some point.  While market volatility may not feel good to many participants, it actually helps those who are regularly contributing to their plans to accumulate more shares which should be a significant financial benefit over the long term!

Fresh Year Fresh Priorities Part 2:

Last quarter, we talked about setting your financial priorities and then tracking your spending so you know where your money is going today.  Now, it’s time to use all this information to set up your financial guide.  At a high level, we suggest prioritizing your cash flow by: 1) Essential bills, 2) Emergency fund savings, 3) Paying off high-interest rate debt, 4) Saving for retirement, and 5) Saving for other priorities.  We think it’s important to pay yourself first. Otherwise, your discretionary expenses tend to use up your available funds.  We suggest everyone should have emergency savings that equal three to six months of living expenses to avoid taking on high-interest debt or getting into financial trouble. 

Generally, we don’t recommend getting into a situation where you’re paying credit card interest on a regular basis.  We get it – everything goes on the card to get the points, airline miles, or cash back.  That’s fine, but you need to make sure you’re setting aside what will be needed to pay the balance off every month.  If your balances have gotten to where you can’t do that, then you should prioritize paying that off first because the interest you pay is really high compared to what you could make on other savings.  Likewise, we think it’s important to get those student loans paid off.  Prioritizing which loans to pay first depends on what interest rates you’re paying.  Federally subsidized student loans can be at lower interest rates.  It’s important you understand what you owe and what the respective interest rates are. 

Saving for retirement matters – the younger you start, the longer your balance can compound and grow before retirement.  Saving through your company retirement plan is generally the easiest and the best way to maximize savings, especially if your employer has a match.  Finally, if you have mid-term goals you want to save toward, you need to add those.  That could be things like funds for a down payment on a house, a travel fund, savings to buy a new car, etc.  Allocating spending with your priorities in mind will help to keep you on track and in control of your financial future.  

As always, if you have questions, let us know.  We’re here to support you in all of your retirement planning needs.