The Benefits of Starting a Retirement Fund Now
By Kevin Faber
Retirement planning is a hot button issue in the news today. Many current retirees are finding that they had not saved enough or invested wisely during their working years. These individuals have to keep working well into their retirement years just to have enough money to keep their standard of living consistent.
Retirement investing is something that you need to start doing as soon as possible. Monitoring your investments is also key to ensure you retire comfortably when you are ready to exit the working world.
Starting a Retirement Fund
There are several different ways to start a retirement fund. Most investors will start off with their employer’s 401(k) or 403(b) plans. These can be very effective savings vehicles as long as you are informed about the types of funds offered by your employer and you are taking advantage of your employee’s matching percentage.
There are also several other savings and retirement investing vehicles that you should consider outside of your employer’s plans. Getting an IRA started at an early age will help your funds to grow by taking advantage of increasing interest rates and the general expansion of the market over time.
Depending on which type of IRA you choose, you can also save for retirement and plan your tax savings along the way. In general, using one of these retirement plans is always better than just opening a general savings account.
Keeping Track of Your Investments
Even though retirement might be as many as 40 years away when you start working, you should still keep track of your investments. You can do this by taking an annual look at how your funds are performing and how the underlying assets are expected to do in the next several years.
Your employer may be able to provide you with this information. However, there are several different websites out there that have investment vehicles on them that will enable you to keep up-to-date on your investment’s performance.
One of these such sites is Wealthfront. In a Wealthfront review it was found that this investment management service allows its investors to choose their investment strategy from the beginning. The software offered by Wealthfront will manage the investment profile of the plan as time goes on based on the performance of the underlying securities and the changing preferences of the users.
Many companies have applications like this that will allow for a more hands off approach to retirement investing. This will allow you to go through your working years without having to worry if your investments are losing money as time goes on.
Will You Have Enough to Retire?
Knowing how much you will need for retirement is the key to knowing if you are in the correct investment classes in your retirement investment account. There are several different sites and investment platforms that will calculate how much money you will need in your account to retire comfortably, based on the parameters that you set up in the beginning. The platform will then take this information and invest your money accordingly.
For example, most individuals should be investing in riskier classifications of investments at the beginning. The amount of time to retirement is so long that the reward will often outweigh the risk in the long run, giving the investor much larger returns at the end of the day than if they just invested in lower risk funds.
You might lose 15 percent in one year, but this will likely bounce back in the next several years. This might give you a 50 percent gain at the end of five years instead of the 10 percent gain you might have earned under the less risky funds. As time goes on, the funds should get less and less risky to help lock in the amount of money available for retirement. Many of these software managed funds will automatically make this possible for investors.
Investing for retirement early is the key to being able to retire happy and comfortably. Do not fall into the same trap that many current retirees are finding themselves in. Find a platform, find your investments, and create your investment strategy as early as you can in your career.