Education Center » Balancing Goals » Have questions about your finances? You're not alone

Have questions about your finances? You're not alone


En español | In the 2016 Bank of America Merrill Lynch Workplace Benefits Report1, 55% of respondents said they want help managing their finances. However, with the vast range of resources and information available it might seem hard to decide what guidance you should follow.

Although your needs are specific to you, there’s a chance that your questions and concerns may be similar to those of your peers. Understanding how others like you are establishing financial goals and making plans to pursue them might give you some ideas about how to create your own savings and investment strategy.

Consider the following questions from three hypothetical investors, each of whom has concerns and habits that are typical of people their age.

To save or to spend... that is the question!

Q: I’m 25, and retirement seems really far away. I save a little for retirement in my 401(k) account through work, but I’m worried that it’s not enough — I don’t make that much money yet, and I have so many bills! I’m also nervous about investing in the stock market. What if my balance goes down? Can you help?

Millennial Mallory


Auto-increase may be a good way to grow your savings without straining your budget.

A: It’s great that you’ve started investing for retirement, and thinking about how you might be able to contribute more. Thanks to the power of compounding — in which investment earnings can potentially generate even more earnings — contributing just a little more now may have a significant impact on the future value of your account. You should check to see if your plan offers an auto-increase feature, which lets you schedule automatic, incremental increases in your payroll contributions over time. It may be a good way to prepare for retirement without putting undue strain on your budget. Speaking of budgeting, consider using an app to track your spending, set saving targets and stay on top of those bills so you can work toward your short- and long-term goals.

And while the stock market has gone up and down, historically stocks typically have greater potential for growth than less volatile investment options such as bonds and cash equivalents. With decades to go before you retire, you should consider taking advantage of that growth potential now. The Risk Assessment and Investment Guide can help you identify your risk profile and choose an appropriate allocation for your retirement account.

When living the dream becomes a financial fantasy

Q: My partner and I are both in our early 40s. We just bought a new home and we have a small child. Life is great, but living the dream has come at a cost — between our mortgage, credit cards and car loans, we owe more than $100,000. We know we should start saving for our daughter’s education, but don’t know where the money will come from. We’ve considered decreasing our 401(k) contributions but it seems risky to gamble on our retirement. Right?

Geoff the Gen Xer


A: Challenging as it may be, balancing savings and debt repayment is a great way to go. Investing for retirement early in your career is one way to harness the power of compounding and potentially grow your nest egg. However, carrying a lot of debt can hurt your credit rating and jeopardize your ability to save. Consider making a debt repayment plan that prioritizes your debt based on interest rate by targeting high-interest liabilities — like credit cards — first. You may not be able to wipe out your debt entirely, but it’s important to keep chipping away at it.

Investing for retirement early in your career is one way to harness the power of compounding and potentially grow your nest egg.

The benefit of compounding could also apply to college savings. Consider establishing a 529 college savings plan for your child so you can save small amounts on a regular basis and make larger contributions when you have the opportunity to do so. Some states also provide tax benefits for these accounts. While the desire to save for your child’s education is understandable, you might consider placing it lower on your list of immediate financial priorities. Remember that education costs continue to rise and historically outpace inflation. Your current debt-to-equity-ratio may not be ideal for maximum saving, but time is on your side as you likely have more than a decade before the first tuition payment is due.

You’re correct that short-changing your retirement savings is probably not in the best interest of your family. It should remain one of your top financial priorities. Start by contributing at least enough to take full advantage of any matching contributions that your employer may offer. Then, over time, as your annual income increases and your debt burden drops, reassess how you’re spending your discretionary income and consider directing more money toward your retirement and your child’s education savings.

Can we afford to retire?

Q: My husband and I are nearing retirement, and we’re excited about entering the next chapter of our lives. We’ve saved for many years, but wonder if our workplace retirement accounts and IRAs will sustain us once our paychecks stop coming in. The current market value of our accounts seems sufficient, but we’ve never actually calculated how much money we’ll need to live on in retirement. My husband believes we should begin our retirement debt-free, but I don’t see how that would be possible without depleting a large portion of our retirement savings, which could ultimately reduce the annual income we’ll need to generate from these accounts. Short of winning the lottery, how can we be sure we’ve saved enough to cover our day-to-day expenses and other financial surprises that arise?

Beth Boomer


A: It sounds like you and your husband have done a good job of planning ahead for retirement. What could be helpful now is determining how to put those assets to use in the most effective way possible. One way to do that is by working out a retirement income plan — and the Retirement Income Worksheet is a good place to start. You can use it to compare your assets and projected expenses to help you determine how much money you’ll need in retirement and which sources of income may provide it.

Meanwhile, if either of you have accumulated multiple retirement accounts from previous employers, you might consider bringing them together in one place. Combining those assets can give you a better sense of your full financial picture — what you have and what you might still need in order to meet your goals. It’s also a good time to review your overall investment strategy to make sure it’s still aligned with your goals, risk tolerance and time horizon until retirement.

Having your mortgage paid off before retirement is a great goal, but it’s not essential.

It would be a good idea to research your Social Security options, too, if you haven’t already done so. These benefits can be an important part of your overall retirement income picture and there are advantages to strategizing when and how you’re going to claim them.

Having your mortgage paid off before retirement is a great goal, but it’s not essential. Instead, you may want to focus on paying down any credit card debt, which can help to improve your cash flow as you head toward retirement.

The next step

Regardless of whether you’re just starting out or retirement is finally in sight, it’s important to make sure that the financial choices you’re making are appropriate for your life stage and investment personality. Regularly revisit your needs and goals, and take advantage of the tools and resources available through your employer’s plan and online at the Benefits OnLine® Education Center.

Learn more and take action

  • View this video for information on investing for your retirement. It might not be as complicated as you think.
  • Explore these resources from Merrill Edge® on planning for college expenses.
  • Watch this video for a short overview of Social Security and the choices you’ll need to make around claiming those benefits.


The examples presented are hypothetical and do not reflect actual clients. They are for illustrative purposes only and results will vary.


CE628DA3 (SCD*******802)