Investing for Retirement

Contrary to common belief, it is never too early to start planning for retirement. Social Security as a sole means is rarely enough to support you and should not be given due importance as your prime source of retirement income. Whether you are planning to take a trip around the world, employ an expensive new hobby or even take on active adult retirement at a senior citizen retirement home, you will need money to fund this lifestyle.

Start early- Starting to save small amounts from as early as your 20s can help you to accumulate greater wealth in the long run.

Invest aggressively- In order to earn a substantial amount for your retirement, it is essential to invest aggressively. The developing power of stocks will allow you to build and amass a huge portfolio especially in a bullish market. In the event of the market performing averagely or poorly, you may experience a shortfall during your working years, but once the withdrawals begin, the stocks’ growth potential will triumph, justifying your aggressive investing strategy. The reason for this is in the long term, stocks provide more inflation protection than bonds which prolongs the duration of your savings.

Earning Power- Besides stock investing for retirement planning, one must also think of extra earning power by working in some capacity during the retirement phase. Whether it is a new career, part-time job or a new entrepreneurial venture, the earnings from these will prove to be sizeable. It also reduces your withdrawals from investments and savings as you will now have the extra paycheck to dip into for daily expenses.

Home Equity- If you have invested in a home, over the years, you will be more likely be sitting on a goldmine of home equity. It may not be the first asset that you would want to use up, but it is a good back up. Moving to a less expensive home, borrowing a home-equity line of credit or taking out a reverse mortgage will allow you to stay in your home along with monthly payments throughout your retirement.

Managing your spending- Keeping in mind your retirement calculations, it is imperative to manage expenditure wisely once you have started tapping into the retirement investment portfolio. It keeps you well within your retirement planning schemes and allows you to live well during the golden years.

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Employer’s 401(k) – This is one of the best retirement planning tools. Not only can you make pre-tax contributions, thereby reducing your taxable income, but the earnings grow tax-deferred until retirement. Several employers may match a portion of your contribution.

Individual Retirement Account (IRA) – A traditional IRA allows pre-tax contributions to grow tax-deferred. This means that you don’t pay taxes until such time that you make the necessary withdrawals. Thus, the amount you would have paid in taxes earns income from the time you contribute it until you take it out.

Obviously, there are no guarantees with anything and so also retirement planning can be a gamble if not planned for prudently. But if you are determined to save, a flexible approach and a firm resolve will provide the requisite retirement benefits that will help you to lead a stress-free and financially secure life.