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Editor’s note: This is a guest article by Ryan Sandberg
There is one thing that I do not like to think about. I don’t even want to write it because, in my mind, I will never stop working. However, I know that one day I will beat my body down so bad that I won’t be able to drag it out of bed. Though I don’t like to think about the day that my body totally gives up and I am no longer able to drag it to work, I know that I will need some type of financial reserves to pay for whatever it is people buy 100 years from today. That’s right, I am going to live and work long after I am 120 years old. After that, I will finally find time to thank myself for having the foresight to plan for my eventual retirement needs.
There was a time when every young person could depend on a certain level of assistance when the time came to retire. This “assistance” was, and is, called Social Security. It was started by FDR in 1935, under the Social Security Act and was one of the first entitlement programs set in place to help people during their retirement. This plan was born out of the economic woes of the Great Depression as a way to establish an infrastructure for dealing with the realities of the costs of living.
Since then, the services that Social Security covers have expanded to a point of being unsustainable. This has caused a lot of doubt among many private, public, and government officials regarding its long-term viability. This has moved much of the planning and saving for retirement to the individual rather than from the policies and decisions of our elected officials.Millions of people have been investing on their own for years to plan for their eventual retirement. This has been through various savings, retirement plans, and stock options; yet not everyone has been so proactive in their savings approach. It seems that more people will need to start saving as early as possible to avoid a reduction in standard of living when it comes time for them to retire. There are many effective ways to start saving and the best plan is likely a multilayered effort. Below are a few of the many options that I think are important to consider:
Savings plans are a bad approach right now if you’re planning to use it for retirement. Interest rates are at near zero and the Fed announced that this isn’t likely to change for another two years. This is because the economy is incredibly weak right now. The Fed is trying to spur economic growth through low interest loans and purchases, but it has adverse effects for those that are trying to save. This is why you need to look at other options when planning for retirement.
If your employer offers a 401(k) program, then you should consider getting invested now. Money is tight, especially for recent graduates trying to pay off student loans and manage the daily costs of living. If you have any money to play with, you should work out a plan with your employer to have an automatic withdraw of a percentage of your income invested directly into a 401(k) plan. Often times, employers will match up to six percent of your investment. This is free money! If your company has such a plan, you should start investing in this as soon as possible. It is so simple to just rework your budget and just pretend that you are not making that money. It goes straight to your plan and you will thank yourself in the future.
Individual Retirement Account (IRA)
Not every company offers 401(k) programs to their employees, and in these situations, an IRA can solve this issue. There are several types of IRAs to choose from. Traditionally, you can put up to $6,000 annually and even more if you’re fifty years or older. These investments are taxed, but at relatively low rates, and in many cases, offer individuals tax advantages that make IRAs the perfect option.
Investing in Mutual Funds is basically working within the stock market. For many who’ve been watching the dramatic swings of 200 plus gains and losses, this doesn’t sound very appealing. Not every stock investment is such a gamble. Mutual funds are a low risk option that give people the best return on their investment. Mutual funds differ from individual stocks in the way that the risk is spread out over several different investments. Your money is placed in a mutual stock that includes many different investors. Your money will be spread out over many different investments. This way, any dips in the market will have a very small effect on your holdings. This long-term strategy has been a very popular investment strategy for those wanting to save and invest with their future needs in mind.
There are many different approaches to investing for retirement, but in spite of whichever avenue you take, it’s best to plan for your long-term needs. I really do not understand what my fellow young adults are thinking when they treat their money like it will always be there. Even though I do not like to think about retirement, it is something that anyone with the knowledge that they will continue to age should do. You never know what the economy, or Social Security, will look like years from now. It really is not very hard to build up a little backup. Educating yourself is as simple as looking online to review the many options available. If you do not want to do any research yourself, just speak with an investment professional that will help you through this process. Either way, it’s best to start now and start young. It might not be fun to think about getting old, but “Old You” will have even less fun regretting the poor financial decisions of “Present You.”About Author: Ryan Sandberg is an Internet Marketer working for Growth Partner Capital with a passion for entrepreneurship, efficiency and ice hockey. He enjoys spending his free time sharing his opinions/findings on finance, marketing, entrepreneurship and current tech trends. You can find his writing on Moolanomy, Retirement Calculator, as well as many other similar sites.