Most people are aware that they need to plan for their golden years. But we are all busy and we are all not investment professionals, so you may not understand what the best strategies there are to not only build but also protect your nest egg.
Whether you are a young whippersnapper just starting in the business world, or you are only a few years away from hanging up the old 9 to 5, you want to always be putting away some of your income. It is important to save because that way, once you have built up enough capital you can get your money to work for you. Keep reading and we will give you methods that you can use that will get your savings, to earn money for you, while you sleep.
It’s called retirement planning because you need a plan, you need to think ahead. Now, it’s ok if you have to change your plan, that’s only natural for one’s life circumstances to change, and your finances need to reflect that.
Your investment strategy may also change depending on where you are in your career. While it is imperative to start saving, no matter how little or how much you make, it is easier to save when you have more income.
The first step that you need to take is that you need to establish a timeline. If you are going to run the numbers on the amount you think you will need to save for retirement, you need to establish an age at which you will retire, to know how much money you will need to already have saved up, to live out your years in comfort. There is a huge difference in retiring at 65, compared to 75 years of age.
This also gives you an idea of what percentage you need to save. If you are going to retire at age 65 and you only have 15 years before that to save, you might need to save a larger percentage of your income. If you are going to retire at 65, and you are 40, then you may be able to save a smaller percentage.
It’s also good to have a dedicated account in which you have to put savings every paycheck. Most employees like to use a 401k that they get a matching contribution from their employer.
Another important aspect of savings, that most financial advisors don’t talk about, is saving in physical gold, silver, and other precious metals. Why is this important? Because the world has gone crazy and every country is printing money like mad, and they can’t just print more gold. That’s why you want to find a reputable gold dealer, and slowly build up a savings of bullion. You might want to read this First National Bullion review if you are looking for a trusted dealer.
Risk vs Reward. Most investors think that you need to take on more risk to get a better return. For the vast majority of investors, this is simply incorrect. Taking on risk is usually what hurts investors the most. Think about Warren Buffett, in a nutshell, you can see that his entire investing philosophy has been about minimizing risk. He tries to get all the risk out of a trade as he can before investing.
This being said, everyone is different. Every investor has a different risk tolerance, and there are times when taking on risk, can lead to outsized returns. You just have to be aware of what type of investor you are. If you invested in a speculative cryptocurrency, and that keeps you up at night, you are taking on too much risk. If you made investments in a variety of precious metals coins, bars, and bullion because they are stable and not as volatile as stocks and bonds, then you can sleep well. It is up to the individual to decide what level of risk they are comfortable with taking in their portfolio.
Open An IRA Or A Roth IRA
With the rise of remote work, there are a lot of employees that do not get a 401k benefit from their employer. Don’t worry if this is you. You can still open up a tax-protected IRA (individual retirement account). An IRA gives you most of the benefits of a 401k, but the big one that is missing is an employer savings match contribution. The hardest thing about an IRA is that you have to set it up by yourself, although it is not that hard if you do just a little research and there are tons of companies that exist specifically to help investors with IRAs.
The second most important consideration to make with an IRA is if you want a traditional IRA or a Roth IRA. With a traditional IRA, you put the money in the account before it gets taxed as income by the government, but you have to pay more taxes when you make withdrawals. With a Roth IRA, you put already taxed money into the account and it grows tax-free, you don’t have to pay taxes when you take it out (because of double taxation rules).
It is up to the individual investor to decide which type of IRA is best for their retirement goals.
Another smart move when you are planning for retirement is to delay receiving your social security benefits. You can technically start getting retirement payments from the government at the age of 66. But, you can significantly increase the amount of money your receive if you know a loophole. The loophole is to wait until you are 70 years old or older before you start taking payments. If you do this you can increase your payments by as much as 8%, which is a pretty big improvement.
The important thing about having a happy and comfortable retirement is the planning you do in the decades before you retire. If you are thinking about it, then you are already making the first smart step. Have a strategy and stick to it. Use discipline and get used to consuming less than you produce. Over decades this saving builds up to leave a comfortable life for you and your family.