You can’t afford to make the mistake of thinking your Social Security benefits will have a significant impact on your financial stability in retirement. Social Security was always intended to be nothing more than a way to supplement any savings you have by the time you reach retirement age. Your saving is intended to be the core of your retirement resources.
Setting your retirement goals is something you need to do today. What you lay out for your future should serve as the driving force behind the financial and investment decisions you make today. To that end, here’s some useful tips to help get you on track to accomplish whatever retirement goals you set forth.
Criteria for Picking Your Investment Options
There’s two things you have to take into account as you contemplate where you want to invest your money. First, you need to consider how much time you have between now and when you plan to retire. The time factor will make clear how much money you need to save every year and how much risk you are going to need to take with your investments to potentially create the investment earnings you will need to meet your retirement goals.
The second criteria you need to consider is the risk factor. If you are younger, you can afford to make riskier investments simply because you have enough time to recover from any bad decisions. If you are closer to retirement age, you might want to invest in conservative options and plan your retirement appropriately. Remember, there is a correlation between risk and reward.
Diversifying
As an astute investor, you would never want to put all your eggs in one basket. In such cases, your exposure to financial forces would likely put you in a risk category that you might find unacceptable.
The best way to invest your money is to create four investment baskets across four types of investment. The way you allocate your savings into your baskets is up to you, but you want to make sure the investments you choose are diversified enough to protect you against market forces. Worthy investment options would include stocks, bonds, real estate and perhaps precious metals (like gold or silver IRA) among others.
By the way, you can choose to put all your monies in a 401K or IRA account. You’ll still have enough flexibility to diversify how those monies are allocated.
Choosing the Right Investments
Your success in meeting your retirement goals will depend a lot on you making good investment decisions. That’s going to require you to do proper research and perhaps enlist the services of a professional investment adviser. If you go with an adviser, you want to select one that’s willing to teach you along the way.
What you need to learn is how to pick stocks that are appropriate or your portfolio. You need to understand the value of hedging against inflation with investments in options like precious metals. You also need to understand how your investment activities affect your tax obligations.
Investing in IRAs
If you don’t have access to an employer sponsored 401K account for any reason, you can invest your money in an IRA account. At your disposal would be three primary IRA options.
1. The Traditional IRA – With this option, all contributions would be made with pretax dollars. The taxes would be deferred until you take distributions, likely at age 59 1/2. (see IRS guidelines for contribution limits)
1. The Sep IRA – This option is much like a traditional IRA. However, it is intended for use by sole proprietors and employees in a small business environment where the company doesn’t qualify for 401K status.
1. The Roth IRA – With this option, all contributions are made after taxes are calculated. The primary benefit is the investor doesn’t have to pay taxes on any distributions, including earnings from investments.
There is another IRA option worth noting, that being a precious metal IRA. If you were to invest in a silver IRA, you could do so with the same tax benefits as a traditional IRA.
Remember, it’s never too soon or too late to start investing for your retirement. By the time your working days are over, you want to be able to enjoy all the things you have spent years looking forward to. Good investing today is the way to get there.
