The lower real estate and stock prices brought on by the economic recession has all Americans re-examining their spending priorities. The increased savings rate comes on the back of a long-period of over spending by most households in America. Everyone should have a basic household budget or cash flow statement. Keeping track of all inflows and outflows is useful exercise. Budgeting creates awareness about spending and forces consumers to prioritize the importance behind their consumption. Identifying a shortfall in inflows early on is imperative to then take corrective actions to get back on a sustainable budget.
There are many account strategies to consider when saving money. After establishing a comfortable emergency reserve, an obvious choice is to increase your savings rate to work sponsored retirement plans (401k and 403b), IRAs and Roth IRAs. Using a taxable securities portfolio should be considered once tax advantaged accounts have been maxed out. Section 529 education accounts and Roth conversion strategies are a little less known. Your advisor at Parsec Financial can guide you through the many account strategies to determine which makes the most sense, taking into consideration your unique goals and objectives.
Rick Manske, CFP