Investing For Retirement – Thinking Long Term
It is always difficult to think long-term. Especially when young and fresh-faced, collecting the first paychecks from your first serious job. There are other purchases more exciting than planning for retirement, like buying a car, or more urgent, like paying off student loans. It’s understandable, then, why young workers might consider retirement to be a low priority. After all, retirement seems light years away when you are just 21 and beginning a career.
Indeed, this is how the majority of Americans think and behave. Nearly 60% of American workers between the ages of 21 and 64 do not own assets in a retirement account according to a study by the National Institute on Retirement Security. The rates are even worse among the youngest workers. 3 out of 4 workers aged between 21-34 have no assets in their retirement account. This, as most people know, is precisely the time to begin investing.
According to a recent study by Bank Rate, the majority of Americans say their biggest regret in life is related to savings. The most commonly cited regret was not properly saving for retirement. One in four Americans wish they started saving for retirement earlier and that they invested more substantial amounts.
Thankfully, the solution is simple: start saving as early as possible. Thanks to compound interest, the earlier one starts saving for retirement, the greater the payoff. Time is your best friend when it comes to investing for retirement.
Another common mistake is “knee-jerk reactions,” said George Ameer, a financial advisor with decades of experience, in a phone interview. “The average investor over the last 20 years only returned a 1.9% return, while the market itself was well over 6%.” “There will be turbulence,” Mr. Ameer warns his clients, it is a matter of understanding how you will respond to that turbulence.
Retirement is nothing new. There is a playbook. It’s simply a matter of acting on that playbook. Still, for someone just beginning to think about retirement, there is an overwhelming barrage of information to muck through. Do your research and, if possible, consult with a financial manager.
Ready yourself for retirement by investing in your future as early as possible, making regular contributions to your retirement savings, and increasing those contributions when you get a raise. To ensure discipline and regular contributions, enroll in automatic payments toward retirement. If your retirement plan is through your employer, be sure to max out the company’s match to you contribution. These are just a few steps one can take toward ensuring future financial security. This may require certain lifestyle changes. That said, minor inconveniences in the present far outweigh a future in which the best health care is unaffordable and cost of living throttles your savings. On average, retirees spend more on health care than they anticipated and, as quality of life improves, we are living longer. Post work-life can extend as much as a quarter century.
What you think of as early is probably not early enough. What you think of as sufficient, could be bulked up. Investing for retirement is one decision you will never regret.
“I don’t view retirement as a finish line,” said Mr. Ameer. “It’s just another phase through the glide path of life.”
Start Investing and Saving For Retirement
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