Kyla Acie seeks to get a jump on investing early in her career. She knows doing so will put her in the best position to reap a lifetime of benefits, including the ability to finance her retirement and her daughter's college education. Although her intentions are good, Acie doesn't have an investment strategy or a set of specific goals in mind. "I want to better understand how to save and invest out of my income,†says the 29-year-old. In the past, she has sort of winged it. "I always paid my bills. I put aside money here and there; at one time I was saving $600 a month. I have the ability to save a lot because I don't spend a lot. But I wasn't following a regimented budget.†Investing for long-term goals is important to Acie. Many African Americans, regardless of age or income level, put off retirement planning and lag behind white investors in accumulating assets, according to the 2010 Ariel Black Investor Survey. The median amount black investors contribute to their retirement plans is $230 per month, compared to $337 a month contributed by white investors. As a result, the median assets in their retirement plans are about half the amount of white investors: $56,000 compared with $106,000. Acie has a 403(b) plan but has blindly guessed at where to invest. "I never knew enough about investing to know where to put my allocations.†She admits she lacks knowledge about how to diversify her savings among various funds to get the greatest return. Acie has $19,000 combined in retirement accounts from three previous employers, $12,000 in a CD, and $3,000 in checking and savings accounts. One factor weighing heavily on Acie's personal finances is her recent divorce. She and her 6-year-old daughter, Sydney, are still adjusting to life on one income. At one point, Acie took on a part-time job to make ends meet. But the Charlotte, North Carolina, mom says she feels blessed. "One door after another has been opened for me.†One of those doors led to a new job at Wake Forest University, where she now works as an assistant director of the Charlotte MBA programs, which pays $45,000 gross annually. (She planned to start a retirement account there in December.) (Continued on next page) While Acie has been a good saver and accumulated minimal debts, she admits she has mishandled her credit in the past. There are defaults on her credit report that won't disappear for another three years, including a roughly $10,000 undergraduate student loan balance that went into collection before she paid it off in 2005. A family tragedy, Acie says, caused her to fall behind. Distraught by her mother's cancer diagnosis and subsequent death in 2003, she failed to keep up with her student loan payments. "You don't always think of things that you need to do, and when you need to do them, when your life drastically changes,†says Acie, who received a bachelor's degree in arts management in 2002 and an M.B.A. in 2005 from Point Park University in Pittsburgh. Point Park paid for her graduate school education because she worked there at the time. A $250 delinquency on medical bills that are in Acie's name has also marred her credit report. Purchasing a home and never missing a payment has raised her credit score to about 600, but it is below the national average of 693. Acie's former husband was ordered to pay child support, but because he is currently unemployed those payments are just over $100 a month. He also covers Sydney's health and dental care insurance. Acie and her daughter reside in a three-bedroom townhouse, which Acie received as part of the divorce settlement. The couple purchased the home in 2007 for $125,000. It has a $115,000 mortgage at a 30-year fixed rate of 6.25%. Including her $1,000 mortgage payment, Acie's monthly expenses total $2,200. Her net monthly income is around $3,500. Acie realizes you have to plot your steps today in order to achieve your goals tomorrow. "I know now that it is important to set personal, professional, and financial goals.†The Advice Black Enterprise devised an investment plan to help Acie meet her retirement goal and also contribute to her daughter's college education. Acie has adequate income, moderate living expenses, and no credit card debt. With an aim to retire at age 62, the rates of return that are needed on her retirement accounts are a little more than 8%, says Alfred L. McIntosh, a certified financial planner and the principal of Los Angeles-based McIntosh Capital Advisors Inc. With a little more than 30 years until retirement, Acie is in a position to amass well over $1 million for her nonworking days once she begins contributing regularly to a slightly aggressive investment program as outlined below. - Reallocate cash reserve. As a more immediate concern, Acie should use the $2,000 contest winnings to pay off the $250 medical debt and not wait until it falls off her credit report. Since she has no credit card debt, as long as she continues to pay her bills on time, her credit score will improve. Even though she has $12,000 in a CD she needs to keep at least six months of gross monthly income, or $22,500, in her emergency fund. To achieve this goal, she can use the remainder of the contest (Continued on next page) winnings to start the emergency savings and then start contributing $150 a month. The CD is earning less than 1%; she can get 1.25% using a high-yield savings account, says McIntosh. "At a time when rates are low, the CD will lock her in, but a high-yield savings account will increase as interest rates eventually rise,†he adds. Once the cash reserve reaches six months of gross income, reallocate the $150 a month to an individual, self-directed investment account with a discount brokerage firm. This enables Acie to grow money apart from retirement funds, McIntosh says. - Roll over 403(b) funds. McIntosh recommends that Acie convert the $19,000 from previous employers' 403(b) accounts into a Roth IRA (contributions are not tax deductible but the money is not taxed if withdrawn after age 59 1/2). In addition, she should spread that amount over a two-year period so that it's reported as income on her 2011 and 2012 tax returns. McIntosh suggests this asset allocation mix: 10% Emerging Markets; 14% International Stocks; 7% Real Estate; 16% International Bonds; 12% U.S. Large-Cap Value; 7% Commodities; 12% Immediate U.S. Government Bonds; 8% U.S. Small-Cap Growth; 14% U.S. Small-Cap Value. Based on the combined historical performance of the allocation of asset classes for these funds, this portfolio mix has produced an average rate of return of 9.86% per year, including two of the worst bear markets since the Great Depression, McIntosh says. - Maximize 403(b) contribution. McIntosh recommends that Acie start contributing $1,000 a month into the 403(b) plan with Wake Forest. This will reduce her taxable income by $12,000 a year. At the end of 2012, when she is no longer paying taxes from converting her 403(b) funds to a Roth IRA, she should reduce her 403(b) contribution to $416 a month and contribute the maximum allowed to the Roth ($5,000 annually) to help build tax-free income. In two years, Acie will also begin getting her employer's 5% 403(b) match. McIntosh suggests she select a diversified mix of Vanguard funds: 8% Emerging Markets; 12% International Stocks; 7% Commodities; 12% U.S. Large-Cap Growth; 12% U.S. Large-Cap Value; 10% High-Yield Bonds; 11% U.S. Government Bonds; 5% Short-Term Bonds; 6% Real Estate; 7% U.S. Small-Cap Growth; 10% U.S. Small-Cap Value. While Acie is limited to her employer's 403(b) plan investment options, this portfolio mix should provide an average annual rate of return around 8.25% based on past performance of the allocation of these asset classes, says McIntosh. - Open a 529 college savings plan. Assuming Acie is still employed at Wake Forest when Sydney reaches college age, the university will cover 94% of tuition there, or $6,665 at another institution. Since Acie wants to stay in academia, she doesn't expect to foot a huge chunk of Sydney's college bill. McIntosh suggests she contribute $175 a month to North Carolina's National 529 College Savings Program. The state allows 529 plan contributors to deduct up to $2,500 from their individual state income tax return. So, that's $2,100 Acie can write off each year. In 12 years, Acie should be able to amass about $40,000.