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Knowing whom you are investing for answers questions

You may, on occasion, ask yourself why you are investing. Why go through the fluctuations of the financial markets, the worry over interest rate movements, the fears of today and the uncertainties of tomorrow?

To answer this question, you may need to ask yourself one more: For whom am I investing? Consider the following:

4 You’re investing for yourself. It sounds selfish, but it’s not. You may be investing in your 401(k), IRA and other investment accounts so that you can enjoy a comfortable retirement lifestyle after working your entire adult life. But you’re also investing so that you can become financially independent — free of worries that you’ll become a burden to your grown children or other family members.

And given the real possibility of spending two, or even three, decades in an active retirement, it’s imperative that you put as much as you can possibly afford into those investment vehicles that can help you pursue your financial independence.

4 You’re investing for your family. If you have children or grandchildren, you may well want to help them pay for college. And, as you know, college has gotten much more expensive in recent years, so you’ll need to save and invest from the time your children are very young, and you’ll need to choose the right investment accounts, such as a 529 college savings plan or a Coverdell Education Savings Account. But you’ll also need to think about other family members, too.

Have you built up enough in your retirement accounts so that the money would be sufficient to support your surviving spouse should anything happen to you? Will you have enough financial resources to help support your elderly parents should they require assistance? And will you be able to leave the type of legacy you desire? As you can see, when you’re investing for your family, you’ve got a lot to consider.

4 You’re investing for your beliefs. Throughout your working years, you may try to give as much money as you can to those charitable organizations whose work you support. Yet you may wish you could do even more.

And eventually, you may be able to do more. For example, if you hold an investment for many years and then sell it, you’ll have to pay capital gains taxes on any increase in value — and the capital gains tax rate of the future may not be as low as it has been over the past several years.

But if you were to give the appreciated asset to a charitable organization, you could avoid paying the capital gains tax, because the organization would be the one that eventually sold the asset.

Plus, you might even get a current income tax break for your contribution. You might also want to include charitable organizations in your estate plans, after consulting with your attorney or other estate tax advisor.

As you can see, you’ve got some “key constituencies” counting on you. By keeping them in mind, you should have the motivation you need to overlook the day-to-day ups and downs of investing — while you keep your focus on your important long-term goals.

Tommy Mcdonald is a financial advisor at Edward Jones in Natchez. He can be reached at 601-446-5666.

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