After talking with many retirement-oriented Fortune 500 employees, we understand what it takes to have a comfortable retirement. One of the easiest ways to build a comfortable retirement is to start in your 20s and 30s. If you are in this age bracket, this eBook is for you. If you are in your 20s and 30s, you might see your parents are focused on managing current or future retirement, taking trips you can not afford, or living in a home that may not be in your budget. 

Your situation is probably dramatically different as you might be navigating the challenges of paying off student-loan debt, trying to manage credit cards, establishing yourself in a new career, buying a home, and having a family. You may think that you have all the time in the world to set up a financial strategy, but time goes by more quickly than you expect. Working with a financial professional may help get you out of debt faster, save for important goals, and give you a head start on retirement after leaving Fortune 500.

So where do you begin? Here are six moves to consider to jumpstart your financial future.

Your health plays a huge part in your financial well-being. We see many Fortune 500 employees in their 20s and 30s overlook the importance of health insurance. If you are off your parent's coverage and not currently covered by health insurance yet at your company because of your part-time hours, you should consider making it a financial priority. Insurance may save you from shelling out thousands of dollars all at once.

Even if you are generally healthy, a car accident or a trip to the emergency room can set you back financially. [1] If you are under the age of 26, you may be eligible for dependent coverage through a parent or a guardian. If you are not eligible for Fortune 500-sponsored health insurance plan or your parent's insurance, you can shop for health insurance plans on the Affordable Care Act (ACA) federal or state insurance exchanges. Visit www. healthcare.gov to get started.

One of the savviest financial plays any Fortune 500 employee in their 20s and 30s can make early in their career is to learn how to negotiate a salary. Since Fortune 500 will base subsequent raises and job offers on your previous salary, you can improve your lifetime wealth dramatically by negotiating for a higher salary early on.

Here are some negotiating tips for boosting your salary:

• Do not be afraid to ask for a raise or salary bump.

• Demonstrate why you are worth more money.

• Do your homework so you discuss what the market is paying for your skills

• Ask for written goals, and set a future date for a review if your request is initially declined.

• Consider salary alternatives, such as performance bonuses and noncash perks, that can improve your lifestyle.

Do you dream of owning a home? Do you want to travel every year? Do you want your children to go to college? Whatever your personal goals are, you’ll need to prepare for them.

Your goals might include the following:

Higher Education:

A lot of the early Fortune 500 professionals we talk to have goals of higher education. College, graduate school, and advanced certificate programs can open doors and boost your career prospects. The average cost of college in the United States is $35,750 per student per year. The cost has tripled in 20 years, with an annual growth rate of 6.8%. Living expenses and little or no income (depending on your employment status as a student) will also raise the cost of education. Preparing now can help ensure a strategy to balance your college savings and loan needs.

A House:

Owning a house is still the dream for many young Americans. For most people, a house will be the largest purchase they ever make. Now is the time to prepare by thinking about a down payment, learning about your credit score (and fixing it if necessary), and studying market trends in your area. A report from Apartment List found that nearly 20% of Millennials have no down payment savings.

A Business:

If you aspire to be an entrepreneur, preparing financially may help you get ahead. Create the vision for the company you want to build, and identify the overhead you need to get started. From there, you can develop ongoing financial strategies that will help you launch a business with a sound financial standing.

When they think about saving and investing, most Fortune 500 employees’ minds immediately turn to retirement. While retirement is an important goal, many other intermediate life objectives also require you to develop financial strategies. The amount of debt that individuals from 18 to 29 years old hold are staggering: 31% of U.S. consumer debt is in the hands of this demographic. For example, the average student loan is $36,406. School loans are not the only debt items holding younger Americans back.

The average credit card debt for Millennials is $4,322. This credit comes at a high cost. Many people with loans in their 20s and 30s put off milestones like getting married or buying a home. The sooner you tackle paying off your debt, the more you can focus on achieving your life goals. If you are living with significant debt, paying it off is one of the smartest financial moves we can recommend to Fortune 500 employees in their 20s and 30s. You might be paying more interest than you are likely to earn by investing. The chart on the right compares historical returns for investments with interest rates on school loans and credit cards.

You can see that the high APR on most credit cards pales in comparison with the historical performance of the market. For most people, it makes sense to pay off expensive debt instead of investing at lower rates of return. Every dollar that you pay toward your debt reduces the amount of your money that goes to interest. Student-loan interest rates are typically lower than most other forms of unsecured debt–such as credit cards and medical bills–so deciding whether to pay down debt instead of investing is a more complex problem.

For better or worse, your credit score is one of the most important indicators of your financial health. A variety of people and institutions can use your credit to make decisions about you, such as lenders, employers, and landlords. Among other debt characteristics, your credit score can reveal whether you pay bills on time or have ever defaulted on a loan. Delinquency rates on credit card payments are significantly higher among those under 30 than in any other age range. For this reason, it is increasingly important for Fortune 500 employees in their 20s and 30s to keep their credit score in mind. Damaged credit can be very costly over time.

Sources: Nerdwallet.com, July 8, 2021. Creditcards.com, July 28, 2021. Fool.com, July 21, 2021.

The chart on the next page shows how credit scores can affect mortgage points. The graph on the next page details a $250,000 mortgage that is assessed 1 loan-discount point, resulting in $2,500 of closing costs. High credit rating scores–such as 740–show that you are a less risky borrower, while lower credit scores reveal higher risk. Remember, your FICO score is essentially your credit score. Mortgage lenders give applicants with lower credit scores a higher risk rating since lower scores indicate a higher risk of applicants defaulting on their mortgages. Thus, lenders will assign higher borrowing costs when you pose more risk to them as a borrower.

Source: Experian.com, July 24, 2020

This calculation translates into higher closing costs, as shown in the graph above. For example, a credit score of 640 incurs $7,000 in closing costs, whereas a credit score of 740 incurs $0 in closing costs. Many people can’t afford to pay these extra costs at closing and choose to convert the discount points into an increased mortgage rate, raising the overall cost of the loan. Typically, every discount point converts into a 0.25% increase in mortgage interest.9 Unfortunately, no secret formulas or easy fixes exist for bad credit. Rehabilitation takes time and discipline, but improving your credit is entirely possible.

Here are some simple steps that Fortune 500 employees can take now to improve and protect their credit:

• Check your credit report every year for free, and dispute any errors.

• Pay all bills on time by setting up payment reminders. Late payments can stay on your credit report for 7 1/2 years.

• Avoid late charges (all collections report to the credit bureaus).

• Make small payments throughout the month to keep your balance low and improve your credit

• Pay down any balances on cards (high balances relative to your total available credit may impact your credit score).

• Pay off your credit cards in full each month.

• Automate your savings: The simplest way to save is to automatically direct a portion of each paycheck you receive from Fortune 500 into your investment accounts. You will quickly become used to your adjusted budget.

• Focus on saving a percentage of your income: Saving even 5% of your income is a great first step.

• Build a budget: If you include a monthly goal in your budget, you are more likely to stick to your strategy than if you save whatever money you have left at the end of the month.

Investing is one of the best ways to help grow and protect your hard-earned wealth over the long term. Let’s say Joe is a 25-year-old investor who deposits $10,000 into an account. If his portfolio earns an average rate of 8% per year, that single contribution could grow to $217,245 by the time Joe is 65, even if he doesn’t add another dime to his account. However, if Joe waits until he is 35 to start investing, that same $10,000 investment would only grow to $100,627.

Although this simple example discounts the effects of fees and inflation, and it is not representative of any specific investment, the basic principle is evident: Time is one of the most important ingredients to long-term investment success. Investing involves risk, and the return and principal value of investments will fluctuate as market conditions change. Your investment strategy should take into consideration your goals, time horizon, and risk tolerance. When sold investments may be worth more or less than their original cost. Past performance does not guarantee future results. Putting your money to work through investing gives you a greater potential for return than saving alone. It is important to know that all investments involve some degree of risk.

Understanding and managing risk is one of the most essential pieces of a long-term financial strategy. As a long-term Fortune 500 investor, it is important to develop a clear understanding of your goals, risk tolerance, and timeline. A financial professional can help you identify your risk tolerance and work with you to create an investment strategy that helps you manage risk while pursuing your long-term financial goals.

New investors often start out investing on their own and then turn to a financial professional when they want access to sophisticated tools, experienced recommendations, and help developing targeted financial goals. An investment representative can help you find the answers to important questions, like the following:

• How does my company’s retirement plan work with my other investments?

• Are there any other investment strategies that I should know about?

• Which investments are right for me?

We hope that you have found this guide interesting and informative. While tackling all of these financial moves at once may seem overwhelming, you can start today by focusing on small steps and establishing good habits. Remember, there’s no better time than now to start taking control of your finances. We also want to offer ourselves as a resource to you, your family, and your friends. We are happy to talk with you about your current financial situation and future goals. If you have any questions about the information presented in this report, please contact us. We would be delighted to speak with you.

The Retirement Group is a nation-wide group of financial advisors who work together as a team.

We focus entirely on retirement planning and the design of retirement portfolios for transitioning Fortune 500 employees. Each representative of the group has been hand selected by The Retirement Group in select cities of the United States. Each advisor was selected based on their pension expertise, experience in financial planning, and portfolio construction knowledge.

TRG takes a teamwork approach in providing the best possible solutions for our Fortune 500 clients’ concerns. The Team has a conservative investment philosophy and diversifies client portfolios with laddered bonds, CDs, mutual funds, ETFs, Annuities, Stocks, and other investments to help achieve their goals. The team addresses Retirement, Pension, Tax, Asset Allocation, Estate, and Elder Care issues. This document utilizes various research tools and techniques. A variety of assumptions and judgmental elements are inevitably inherent in any attempt to estimate future results and, consequently, such results should be viewed as tentative estimations. Changes in the law, investment climate, interest rates, and personal circumstances will have profound effects on both the accuracy of our estimations and the suitability of our recommendations. The need for ongoing sensitivity to change and for constant re-examination and alteration of the plan is thus apparent.

Therefore, we encourage you to have your plan updated a few months before your potential retirement date as well as an annual review. It should be emphasized that neither The Retirement Group, LLC nor any of its employees can engage in the practice of law or accounting and that nothing in this document should be taken as an effort to do so. We look forward to working with tax and/or legal professionals you may select to discuss the relevant ramifications of our recommendations.

Throughout your retirement years we will continue to update you on issues affecting your retirement through our complimentary and proprietary newsletters, workshops and regular updates. You may always reach us at (800) 900-5867.

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