Your retirement could be decades away, or five years from now. It is never too early or too late to prepare. Some plans require a 5-year commitment or more, but consumers do not necessarily need to enroll in a plan to save for retirement. Here are some tips for investing in your future as a retiree.
Think Ahead and Research
Start thinking about retirement now even if you are 28 years old, single, and without substantial debt. It might be difficult to imagine what financial burdens you will face at the age of 70, but if there are retirees in your immediate circle, ask them what challenges they face.
How much are their medical bills? What aspects of aging did they find most challenging? What financial hurdles have they faced?
You will have to read what the financial world has to say eventually. Start by perusing financial periodicals of repute: Forbes, the Wall Street Journal, and the financial sections of broadsheets.
Watch videos aired on cable networks where financial experts discuss the market. Accumulate a spread of opinions to establish an objective median. You might find the market favors real estate, is pro precious metals, or be drawn to mutual funds.
You will discover opinions about the best stocks, etc., are mixed, but one area of agreement is diversity. A retirement portfolio should include the items above and many more.
Stocks move quickly up and down, falling and gaining against the competitors’ stocks. Mutual funds move slowly, taking anything from 6 months to three decades to mature. Gold is typically viewed as a long-term investment while silver moves more quickly and unpredictably.
Choose investment products you can live with and make sure you have a say. Investment specialists usually ask customers how they feel about mining, oil, etc. They ask consumers if they prefer socially and environmentally responsible investments in solar power, small business, and firms with green credentials.
After you state your preferences, an account administrator might make all the choices, but you have at least made it clear that none of the products he dabbles in should involve blood diamonds or back companies that treat the environment carelessly.
Plans vs. Personal Investments
The United States Government urges consumers to plan for retirement so they do not wind up penniless at age 70 ½, requiring public assistance that becomes a burden to the system.
To this end, they have introduced several IRA options and 401k programs. A 401k retirement plan is initiated by your employer. While employed with an organization, you pay in a certain amount and the employer will often match contributions to a particular limit.
Upon leaving employment with that organization, a 401k will remain dormant or be rolled into the next 401k with a new employer. Consumers might be able to leave those 401ks untouched until retirement, but there is a good chance the funds therein will be woefully inadequate. Many such plans under-perform, meaning they either grow slowly compared to inflation or they lose money.
Check on the performance of these plans; do not assume they will be enough to support you. If you feel they are adequate, maybe leave them. Under-performing 401ks from past employers could be rolled into IRA accounts.
An IRA is independently established by the consumer. He hires a custodian to administer funds and to make investments on his behalf. The alternative is to open a self-directed IRA.
Self-directed IRAs give the consumer a chance to really learn about investments; about the way global, federal, and personal economies work. They also give consumers a chance to invest in products that the average custodian will not consider. These include niche shares and funds, precious metals, and investments the customer has personal experience of and faith in.
You can open several IRA accounts and fund them with numerous products up to a combined limit set by the IRS. Each one will hold something different: real estate, gold, mutual funds, etc., but if you own precious metals these cannot be held in a personal safe. You have to arrange storage at a federally-approved depository.
Personal investments not tied to plans like IRAs and 401ks can be owned by the investor and personally administered. You have to be careful about what you buy, however.
Precious metals are divided into collectible items and bullion (including bullion coins) which contain a minimum purity level. The only four types of bullion acceptable in IRAs are palladium, platinum, gold, and silver, but personal investors can add copper, ruthenium, and rhodium. The advantage of metals is that they are easy to liquidate.
Something like real estate, however, can be an excellent investment with the power to provide rental income for years. The big issue you have to realize, though, is that IRAs are tax-deferred or even tax-exempt and personal investments are not. There are no tax benefits to go your own way.