Investing in retirement may just be the strategy that will help you retire earlier than expected. We all dream of having a good retirement. After years of toiling in our chosen career, we deserve to retire in peace and comfort. But thanks to the Great Recession, a lot of us are questioning our ability to retire immediately.
Pre-retirees are convinced that they have to retire at a later date. Some are resigned to keep on working until they drop. There are two reasons why a lot of incoming retirees are choosing these retirement lifestyles. The first is the fact that they have a lot of debts to pay off. You have mortgages, credit cards, and even car loans. These weigh heavily on people who are about to retire. They cannot give up their regular income because of the payments they have to sustain for the next couple of years. The other reason why there is a delay or no retirement at all is the fact that people failed to save enough. Whether they started late saving or they used up their retirement plan, the fact remains that a lot of retirees have less than what they need to retire comfortably.
According to StatisticBrain.com, the average length of retirement is 18 years. That means if you need $3,000 to live comfortably each month, you need at least $648,000 so your funds will outlive you. The same site reveals that the average savings of 50 year old pre-retirees amount to $42,797. If they wish to reach more than $600,000, they need to put aside more than $3,000 each month for the next 15 years. That seems like an impossible feat right?
So what can you do to be able to retire on time with insufficient retirement funds? You may want to consider investing in retirement. You need to start thinking about how you will invest the existing funds that you have in order to make them grow at a faster rate. We all know that investing in stocks, bonds, mutual funds and similar accounts will give you a higher percentage increase.
Before you invest your retirement money…
There are so many options to invest while you are retired. It is advisable that you consult an expert or hire a professional to handle your portfolio for you. But before you proceed, you also need to check some things about your finances. Although investing in retirement will allow you to grow your money at a faster rate, you are putting your money at risk. You need to weigh the gains with the risk that you will take to get it.
Of course, investing rules are a bit different when you reach your 60s. Here are a couple of things that you need to think about before you invest your retirement money.
- Have a target amount. You are investing to earn more money so it will outlive you. That means you have to know how much your savings should last. It will give you an idea how much money you need to add to your retirement funds. When you have a target amount, it should be easier to come up with a strategy that will help you reach your goal.
- Know yourself. In connection with the first, you need to get to know yourself thoroughly so you will know how much you need to target. Find out the life expectancy of those in your family. Not only that, you need to be aware of any health concerns that you may also have in retirement. This will help you gauge the expenses that you will be facing. If you have a lot of health issues, you need to rely more on investing in retirement to increase your funds.
- Compute your annual expenses. Once you understand your history and what you could be facing in the future, you should be able to compute how much you need to spend each year (or month). If you know that your health costs will be high, you need to start thinking about changes in your lifestyle to prepare for what you need. You can downsize your lifestyle so your expenses will be lower. Taking control of your expense will allow you to identify where you can cut back so you can reach your investment goals more effectively.
- Make sure your emergency fund is intact. It is up to you how much you want to put into your investment. However, you need to ensure that your emergency fund is intact – at the very least. This is especially true if you are investing in stocks. In case you need immediate cash and the stocks are low, you will be forced to withdraw and suffer losses. If you have your emergency fund on hand and not invested, the rise and fall of stock value will not matter.
- Consider carefully where you will invest. Investing in retirement should be done carefully because it will be hard to replace since you no longer have a regular income. That means you need to be careful about where you will invest your money. Stocks will give you the best opportunity for monetary growth but it is also risky. Bonds will give you less risk but the growth is not as much. Find a balance and diversify your investments. That way, if you lose in one account, it will not affect your whole fund.
In case you think your investment returns will not be enough, you may want to think about earning from other sources of retirement income. You can get a part time job or you can capitalize on a hobby that you have. That way, you can remove some of the stress that you have regarding your retirement money.
Investing tips from experts that retirees can ponder on
If you want to grow your personal wealth, investing is proven to be an effective means to do that. It really helps to find experts who can explain things to you. But you can also do your own research so that you can be aware of what investing in retirement entails.
The best way to learn is to look at successful investors in society – past and present. One of them, Warren Buffett gave an advice through an article published in USNews.com. He said that investors should put 10% of their cash in short-term bonds while 90% should be placed in low-cost S&P 500 index fund. Of course, applying this in your investment strategy will depend on your goals. You need to exercise caution when determining the advice that you will follow.
Here are other quotes and tips that could help you make certain decisions about investing.
- The stock market is filled with individuals who know the price of everything, but the value of nothing. – Phillip Fisher. This implies the significance of research and knowing what investing is all about.
- The individual investor should act consistently as an investor and not as a spectator. – Ben Graham. This is similar to the first. It is important to observe the market because that is where you take your cues when it comes to your investment decisions. Be sure to rely on facts – not speculations.
- Every once in a while, the market does something so stupid it takes your breath away. – Jim Cramer. In other words, investing is all about taking risks. You need to be ready for this.
- Investing should be more like watching paint dry or watching grass grow. – Paul Samuelson. The growth that you will get from investing in retirement is not something that will happen overnight. You need to be patient about it.
- In investing, what is comfortable is rarely profitable. – Robert Arnott. In investing, you need to realize that you need to take risks to earn more. But despite that, you need to take cautious risks to protect your retirement money.
- Be fearful when others are greedy. Be greedy when others are fearful. – Warren Buffett. When the market is down, Warren Buffett is saying that you need to buy more stocks. You can purchase more with the money that you have. But when the market is soaring, you need to sell. That is how you can profit from your investment.
Take into careful consideration these tips that come from experts. Investing in retirement can be very profitable as long as you know what you are doing.