5 Areas That Every Nurse Should Know About Their Investment Accounts
Nurses should understand their investments and understand how their portfolios are invested!
As a nurse working either for a private clinic, a large hospital or other large corporate setting, chances are that you are provided a retirement plan through your employer.
You may also have opened an Individual Retirement Account (IRA) on your own. Very often these plans are never reviewed; and a process, timeframe, risk tolerance and goals are not addressed nor evaluated in detail.
We have put together 5 areas that every nurse should know about their investment portfolios so you can ensure a better financial future.
Get a good understanding of what type of account you have in place.
Are you investing with pre-tax dollars or with after tax dollars (such as with a Roth IRA)? Understanding what each of these retirement accounts are and how they work is important as both have their advantages and disadvantages.
Understand how your money is invested within the account that you have.
How are your holdings diversified? How much exposure does your portfolio have to stocks, bonds and other asset classes?
Do you understand how the mixture of asset classes and diversification can affect the volatility within your account? Make sure a risk analysis is properly done and make sure that it fits within what you can financially afford.
Timeframe: Make sure that you have the correct timeframe for all of your investment accounts.
You may need to access your cash from these accounts at different times. If your cash from retirement and other investment accounts are accessible exactly the same time, it may be time to revisit and reevaluate what the objective of each account is.
Money saved for your kids’ college education may not always be planned nor invested the same way your retirement account is invested.
Diversification: Understand how all of your different accounts are invested.
Having different investment accounts with different financial institutions does not mean you are diversified. Have your holdings analyzed to create a diversification plan that fits your financial investment accounts and goals
Understand the time value of money and how inflation takes away your purchasing power.
Cost of purchases generally gets more expensive each year. Despite pay raises the effect of inflation virtually negates the raise.
By understanding the effects of inflation it becomes clear that in today’s low interest rate environment cash sitting in the bank virtually brings little or no return on your investment.
Also, bank accounts have easy accessibility causing your cash to have the least amount of time to earn interest or dividends. Premature withdrawal from your retirement accounts can have negative effects on growth of your invested cash. Time value of money is an important topic we will cover more in the future.
As an example if you withdrew $10,000 from your account to spend on travel the cost is not just $10,000 but also the future growth of that $10,000 over time. If that $10,000 could have stayed invested for 20 more years that real cost based on a 6% rate of return is close to $30,000. Perhaps an alternate source of money could have better financed the trip.
Reviewing these 5 areas gives you a better idea of the types of accounts available to plan your retirement and know how to invest your money wisely. Create a plan, understand your plan and follow your plan.
Written by: CreativeNurse Team 2016-16974 Exp. 1/18