Retirement Investing Tips

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What are the benefits of investing for retirement while young?

The Benefits of Investing while Young

There are many benefits to retirement investing while you are young. Many people mistakenly delay investing for their retirement until it is too late to earn a good return on long-term investments. Here are some benefits to investing while young.

Save money on taxes – by contributing to a 401k plan or other employer based plan, you will lower your taxable income and save money on the amount of taxes you pay.

Have a lower savings payment- you should begin your retirement investments with a savings account. By starting young, you will contribute a lower monthly payment for a longer period of time as compared to a higher payment for a shorter length of time to reach the same goal

Compounding- the longer you save, the more your principle will compound. You can then earn on your principle and interest, earning greater money

Matching contributions from your employer- when you begin your employee sponsored plan while young, your employer may match your contributions. This is an opportunity advantageous to the young worker who will contribute to their plan for a long period of time.

Take more risks- the younger investor will invest in high risk investments which yield higher rewards

How can compounding help my retirement portfolio?

Investing for Retirement and Compounding

One tool to enhancing retirement portfolios is to use compounding. Compounding is using the earnings from your assets to reinvest in the same asset. Compounding includes the principle and interest and when your assets compound for a long period of time, you can earn a substantial amount of money for your retirement portfolio. Compounding is the key to retirement investing.

When should I begin investing for retirement?

Investing Early for Retirement

To be successful, you will need to carefully plan your retirement funds. One of the best ways to ensure that your needs will be met for this period of your life is by retirement investing while you are young. Statistics have shown that people who begin investing for retirement in their thirties are at greater liberty to take bigger risks. These risks can pay off in substantial ways and help grow your portfolio. By delaying your investments until later in life, you will lose essential ground for growing your nest egg. Even if it seems that you don't have much to invest, you can always open a simple savings account and rely on compounding to grow your retirement fund. You should also participate in your employer's benefits plan, such as a Defined Benefit Plan or a 401k plan. As soon as you enter the workforce, you should begin investing for your retirement.

How can I educate myself regarding investing?

Investing for your Future: Educate Yourself

Investing during retirement isn't a matter of chance; it's a matter of skill and strategy. You should take the time to familiarize yourself with different investment strategies and philosophies. Your retirement portfolio depends upon the choices that you make today; therefore it is imperative that you take every step to educate yourself in the area of finances and investments. Here are five books that are recommended to help further your knowledge and understanding of investments.

A Random Walk Down Wall Street: Burton G. Malkiel

How To Make Money In Stocks: William J. O'Neil

Common Sense On Mutual Funds: John Bogle

Stocks For The Long Run: Jeremy Siegel

The Intelligent Investor: Benjamin Graham

What are the advantages of Buy and Hold?

Buy and Hold: Investing in your Retirement

The strategy, “Buy and Hold” may be controversial in the investing arena but offers many advantages to those who are investing during retirement. This strategy consists of buying stocks then holding them for a long period of time. This allows for greater tax advantages and savings over the long run. Consult with your Investment Advisor for the best short (money market investments) and long-term investments to diversify your portfolio.

Why should I use an Investment Plan?

Investing During Retirement: Begin with a Plan

When investing during retirement it is important to remember that investing comes with risks. One of the best ways to help lower the risk and manage your retirement portfolio is to have an investment plan and to stick with it. The older you are, the more important your retirement investments will become. By keeping to your investment plan, you can avoid pitfalls such as selling out of fear and buying out of emotional investing such as hope or greed. Stock markets change, inflation rises, and numbers plummet. The best way to ensure that you will keep your retirement portfolio well managed is to resist the urge to cave in to your emotions and stick with your plan. If you feel that you need to create a new plan, then you should discuss those changes with your Investment Adviser to devise an enhanced plan.

Why should I diversify my portfolio?

The Importance of Diversification

When it comes to retirement portfolios nothing is more important than lowering the risk of loss. Diversification is an investment strategy that helps lower risks and help strengthen and protect the portfolio. Through diversification you will place your money in a number of different assets and investments, thereby increasing the chance of having a security net should one area take a turn for the worst. Work with your Investment Planner to make sure that your portfolio is diversified; this will also help you to stay strong while investing during retirement years.

How can I invest for retirement later in life?

Risky Business: Investing for Retirement

The older you are, the more likely you will take lower risks. When it comes to retirement investing, the younger you are the more you will risk. This is why it is important to begin building your portfolio while you are young. It is widely believed that the higher the risk, the higher the reward- another reason why younger people tend to take more risks. If you begin investing for retirement at an older age, you will be more “risk averse”. Younger investors tend to choose investments such as real estate, options, futures, and collectibles (high risk investments); older investors look for low risk investments such as government bonds, CDs, and bank accounts. However, you can still build a large nest egg, even with investments later in life. You should consult with an investment planner for advice on investing and for help with your retirement portfolio management.

Should I be concerned about inflation when investing for retirement?

Investing and Inflation

Many people are concerned about the effect that inflation will have upon their retirement portfolios. This is very important for those who live on a pension or personal savings and don't have “new money” coming in. It is an important area to consider, especially if you are investing your money in an area that will yield a fixed return. However, if you diversify your retirement portfolio, you can rest assured that you will be adequately covered during high inflation years. If you are interested in purchasing assets that rise and accommodate for inflation, then you may want to consult with your Investment Advisor about Treasury Inflated Protection Securities (or TIPS). These treasury notes will accommodate for inflation.

What does it mean to be a Passive Investor?

The Passive Investor

Are you a passive or an aggressive investor? A passive investor will buy long-term investments and wait for them to appreciate. These are usually low risk investments and will help build up retirement portfolios. It is important to develop a plan when you are retirement investing for the long-term. This will help you to stay focused and not pull your investments out due to fear. Whether you are a passive long- term investor or an active short-term trader, the importance of diversification cannot be overstated. Adding both long and short-term investments to your portfolio is the best way to minimize risks and add security to your retirement investments.

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