If you are an adult with a full time job and haven't started saving for retirement yet, it's past time to do so. You might be forty years from retirement age and think you have plenty of time until you need to think about it, but that's simply not true if you have hopes of a financially stable retirement.
Retirement isn't all vacations and shuffleboard, especially if you don't have a solid retirement fund. Take care of future you by starting to think about and plan for retirement now, regardless of how many years away it might be.
Retirement Planning Overview
Relying on Social Security to live on during retirement is, frankly, a very bad idea.
It's important to think about what you idealize your retirement looking like so you know how much you need to save to fulfill those dreams. You should also consider what expenses you expect to have in retirement, as well as how long you (and your doctor) predict you'll live. If you are healthy and expect to live longer than average, you will need to save more than average for retirement. Make sure you are also figuring inflation into your projected amount needed.
A basic rule of thumb is to think about how much income you'll need annually when you are retired, determine how much you will get from Social Security, and the difference will be the amount of money that will come from your retirement savings. It's suggested the amount that comes from your retirement savings each year should be around 4% of your total savings to keep from exhausting your funds too early.
Discover Different Types of Assets
Once you have decided to start investing to help reach that retirement goal, the next step is determining what you actually want to invest in. Here are a few main options for you to consider.
Real estate is a great way to get started investing. Whether you are purchasing your own home to live in, a property to rent out either long term or as a vacation rental, or a commercial property, real estate can be very lucrative.
When you purchase stocks in a company, you are essentially agreeing to share in their profits and losses. This comes with some risk, of course, but it can also be highly rewarding.
The stock market can be a bit of a roller coaster, so you have to be able to stomach some losses from time to time as you wait for things to even out. You also need the wisdom to know when it's time to sell certain stocks so your loss isn't permanent.
Investing in bonds carries less risk than stocks, but you are also more limited in how much your investment can grow. A bond usually has a specific maturity date, and may only pay up to a certain amount of interest. With a bond, you are essentially loaning money to the issuer and they thank you by paying it back with interest over time.
How to Choose the Right Long-Term Assets
When making investments with the goal of saving for retirement, it is important to find the right mix of risk and return. You don't want your entire portfolio to be full of high risk investments, but you also don't want to be too conservative and miss out on some opportunities to earn more return on your investments.
Always take the extra time to be well-informed before rushing to make an investment decision. Be sure you choose long-term investments that are going to work well for your financial goals. If you need some time to figure out your best approach, keep the money you plan to invest in a high interest savings account or in a conservative investment until you can make a long-term decision.
Best Investments for Retirement
There's no set in stone answer for everyone, the best investment for your retirement is going to probably be different from the best investment for my retirement. As a general rule, however, some of the best retirement investments, in addition to the ones we already talked about above, are:
The Time is Now
Don't get caught thinking you have plenty of time to think about saving for retirement later. The longer you wait to start investing, the harder you will have to work to save enough for a comfortable retirement.
There will always be plenty of excuses for why you could wait to start, but your future self will thank you for rejecting the excuses and beginning to invest as soon as possible. Retirement might seem like an eternity away, but time moves faster than we think.