Turning 30: Sona Garcia

Soña Garcia , who turned 30 last month, is an attorney in her third year with the Dallas office of law firm Vinson & Elkins LLP. Her salary is $142,000, but she has no traditional pension, nor does she have a profit-sharing plan. She is contributing 6 percent of her salary to her 401(k) plan, which does not include an employer match, and has about $13,700 in that account. Before moving to Dallas, she worked as a congressional aide and then attended Tulane law school. As a Hill staffer, Garcia was a member of the federal Thrift Savings Plan, but when she left Washington, she terminated the plan and rolled it into an IRA at a bank in her hometown, Albuquerque. She has about $6,000 in that account.

In addition to those savings from work, Garcia has a trust fund from a grandparent and about $70,000 in another account in which she is saving to buy a house.

She also has a federal student loan balance of $55,000 at a 2.875 percent interest rate and additional debt from law school of $26,500 at rates of nearly 7.89 and 7.87 percent.

What our experts recommend:

Both Salisbury and Diekvoss recommended that Garcia concentrate first on paying off her higher-cost student loans. "I would even consider using cash in the current savings account to pay them off," said Diekvoss. "I know the savings is for a house down payment, but the interest rate on a cash account is going to be substantially less than the current 7.8 percent Soña is paying on the loans."

And both agree that she should maximize her pretax 401(k) payments. Salisbury also suggests that Garcia buy Microsoft Money or Quicken software to build a budget and begin keeping track of her expenditures, making sure that she has allocated enough for debt repayment and set aside more for savings before she spends on discretionary items. Salisbury said that Garcia should be putting aside 20 percent of her salary toward retirement, and that the longer she waits to increase her savings, the higher that percentage will need to be. Diekvoss said that if Social Security disappears before Garcia retires and assuming a 7 percent after-tax return on her investments, her retirement savings would fall $990,000 short when she is 65.

Garcia raised a concern familiar to those of us who end up owning retirement savings accounts without having been trained as money managers. "I haven't done a lot of changing or managing my investments," she said. "I would like to become more aggressive with it."

Diekvoss said that instinct was right. In fact, he recommended a more aggressive asset allocation for all three volunteers because their youth allows them to take more investment risks. Each of them, he said, should have 80 percent invested in stocks and 20 percent in fixed-income investments, such as bonds. "Within the equity allocation we recommend owning a mix of value, growth and core strategies within the large cap, mid cap, small cap and international investment classes."

Okay, that probably requires some translation. Value stocks have low share prices compared with the value of a company's assets. Growth stocks have high share prices compared with the asset value, often because the company's earnings have been growing rapidly. Core strategies are investments based on the company's leadership and strategic direction. Large-cap, mid-cap and small-cap refer to the total value of the company's stock.

Owning this broad a range of investments "is designed for long-term growth without as much volatility as owning a single asset class," said Diekvoss. Picking individual stocks with these characteristics could be as time-consuming as a second job, but there are mutual funds that invest in different categories of companies.