It's never too late to plan. How to invest for retirement

If you haven’t yet had your 35th birthday, it is likely that you’ll need $1 million or more for retirement. If that scares you, read this to help you to be prepared for a comfortable retirement.

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  • There are lots of reasons to save, but none loom larger than retirement. Many people who retire after 2042 will have more than $1 million in their retirement savings when they retire. Those who don’t will wish they did. These tips will help you invest in such a way that you can retire with the money you need.

  • Most people will want to have 10 to 15 times their last employed year’s income in their retirement savings. That kind of balance will enable them to maintain their lifestyle through their entire retirement. In order to do that, you need to be saving for retirement and investing it wisely. In order to get the investment returns you will need, here are the investments that are most likely to help you achieve your retirement goals.

  • 401k plan

  • your primary retirement savings should be in your company’s 401k plan. Make sure that you are participating by contributing a portion of your compensation every pay period.

  • Stocks

  • stocks have traditionally earned returns well above the inflation rate, meaning that over the long term if you invest in stocks you can expect the value of your portfolio to grow faster than the cost of living increases. You should be getting head of the game. It is important to note that stocks go up and down in value every day. In the short run, stock prices appear random. You can only predict the direction of the market over the long term. Individual stocks are inherently hard to predict. As a result, you’ll want to own lots of different stocks in different industries. As a good rule of thumb, owning at least a dozen different stocks will smooth out some of the biggest investment bumps. You generally cannot invest in stocks directly through your 401K plan.

  • Long-term bonds

  • corporate bonds have not traditionally returned yields as high as the stock market, but the returns are more stable and also typically exceed inflation. So, here again, you can invest in a way that will allow your money to grow faster than the value of your money that is being eroded by inflation. If you invest all of your money in bonds you would expect to earn less over the long term than if you include some stocks in your portfolio. As with stocks, you generally can’t invest in bonds directly through your 401k plan.

  • Mutual funds and ETFs

  • the easiest way for small investors to own stocks and bonds is to use mutual funds and ETFs (exchange traded funds). These funds pool the money from many large and small investors. They also hire professional managers to make the investment decisions. You should buy only mutual funds that charge low fees, allowing you to get the benefit of a professional manger without paying much for it. Many brokers will allow you to buy (and sell with limitations) certain mutual funds and ETFs without paying any commission. Your 401k plan is likely to offer a variety of mutual fund options.

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  • Asset allocation

  • you should choose what proportion of your portfolio to invest in stocks and what proportion to invest in bonds. Over time, as you near retirement, you may want to shift that balance more in favor of bonds than stocks (bonds are less likely to lose value and generate more cash). That said, most people recognize the need to keep some of their money invested in stocks even after retirement. Your retirement should last for a long time.

  • With these basic ideas, you’re ready to start investing for your retirement. Be sure to talk to a financial advisor to determine how much you should be saving each month. If your employer offers a 401k plan, your employer should make a financial advisor available to you at no charge to help you make decisions about your investments and contributions to the 401k plan.

  • This article was originally published on FamilyShare.com. Check out these other related articles: $1 million won't make you rich in retirement, How do I save enough for my dream retirement? and How do I diversify my retirement savings appropriately?

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Devin Thorpe, husband, father, author of Your Mark On The World and a popular guest speaker, is a Forbes Contributor. Building on a twenty-five year career in finance and entrepreneurship that included $500 million in completed transactions, he now champions social good full time, seeking to help others succeed in their efforts to make the world a better place.

Website: http://www.yourmarkontheworld.com

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