Looking Forward: Investments, Assets and Your Retirement

Planning for retirement is not something that should be put off to the last minute or after the company farewell party. There are many things to do shortly before you retire and some things you should start as soon as you enter the work force. It is not original, but it is never too early to start planning for your future.

Beginning At an Early Age

If you are just entering the work force and not making a whole lot of money, it is still not too early to get into the practice of savings. Decide to put five percent of your paycheck into savings. 

As your income grows, continue to save. Try not to touch it. This is the first step toward reaching the goal of having a comfortable and enjoyable retirement.

Take Advantage of Any Program Your Employer May Offer

If the company you work for offers a 401K plan, participate in it. Contribute as much as possible to the plan. Usually, there is an option of making taxable or tax deferred contributions. 

Tax deferred may give you a little more spending money when you first begin investing, but it is not going to be a big help regarding income taxes when you retire.

Open an IRA

The individual retirement account allows you to put a portion of your income in an account that will draw interest. The contributions are tax deferred. There is also the possibility of opening a Roth IRA. In this plan, the money you contribute is taxable. However, the money you earn will be tax-free when you withdraw it. 

Regardless of which plan you open, do not go to the nearest bank and take whatever fixed rate is being offered. Talk to a financial adviser or stockbroker and determine how the money can be invested to generate the best yield with a reasonable degree of security.

Looking Forward: Investments, Assets and Your Retirement

Planning for retirement is not something that should be put off to the last minute or after the company farewell party. 

There are many things to do shortly before you retire and some things you should start as soon as you enter the work force. It is not original, but it is never too early to start planning for your future.

Beginning At an Early Age

If you are just entering the work force and not making a whole lot of money, it is still not too early to get into the practice of savings. Decide to put five percent of your paycheck into savings. 

As your income grows, continue to save. Try not to touch it. This is the first step toward reaching the goal of having a comfortable and enjoyable retirement.

Take Advantage of Any Program Your Employer May Offer

If the company you work for offers a 401K plan, participate in it. Contribute as much as possible to the plan. Usually, there is an option of making taxable or tax deferred contributions. 

Tax deferred may give you a little more spending money when you first begin investing, but it is not going to be a big help regarding income taxes when you retire.

Open an IRA

The individual retirement account allows you to put a portion of your income in an account that will draw interest. The contributions are tax deferred. There is also the possibility of opening a Roth IRA. 

In this plan, the money you contribute is taxable. However, the money you earn will be tax-free when you withdraw it. Regardless of which plan you open, do not go to the nearest bank and take whatever fixed rate is being offered. 

Talk to a financial adviser or stockbroker and determine how the money can be invested to generate the best yield with a reasonable degree of security.

Buy Life Insurance

Term life insurance starts out cheap. However, the premium increases over time. If you outlive the term, you or survivors get nothing. If it was an employer's policy, and you change jobs, there will be no refund. 

You can buy a 20-year paid-up whole-life policy for a higher, but fixed, monthly premium. If married, purchase a policy for yourself and your spouse. If there is an early death, the benefits are tax-free and can cover funeral expenses and help with the mortgage payments.

Be Diligent

Check your investments at least every month. Talk to your financial adviser or broker to get their take on where the economy is heading. Do not invest all your funds in one stock or company. At any given time, some of your investments could be threatened by a change in the financial markets. It may be necessary to make some adjustments.

Simply stated, to plan for your future you have to invest money you are earning today. Social Security in some form will be around 40 years henceforth and probably longer. However, it will only cover a fraction of your expenses. Do not buy over your income. That BMW in the showroom looks great, but the Chevrolet will get you to work. 

Think about the things for which you are planning. Is it your own retirement? Are you saving for your children’s college education? Do you plan to move to an exotic island before you are 50? Prioritize and be reasonable in what you plan to do. Watch your investments. Communicate with your financial adviser on options that may develop. Do not depend on a company retirement plan. 

You may have several different jobs during your working career, and the retirement plan may not follow you. If a company pension comes your way, you are ahead of the game. However, if it disappears, you can still be in good financial shape if you start early in planning for the future.

Term life insurance starts out cheap. The premium increases over time. If you outlive the term, you or survivors get nothing. If it was an employer's policy, and you change jobs, there will be no refund. 

You can buy a 20-year paid-up whole-life policy for a higher, but fixed, monthly premium. If married, purchase a policy for yourself and your spouse. If there is an early death, the benefits are tax-free and can cover funeral expenses and help with the mortgage payments.

Be Diligent

Check your investments at least every month. Talk to your financial adviser or broker to get their take on where the economy is heading. 

At any given time, some of your investments could be threatened by a change in the financial markets. It may be necessary to make some adjustments.

Simply stated, to plan for your future you have to invest money you are earning today. A specialist from Pinnacle Financial Partners recommends taking a look at your financial assets as a whole to determine what they can offer for your future plans. 

Social Security in some form will be around 40 years henceforth and probably longer, however, it will only cover a fraction of your expenses.

Think about the things for which you are planning. Is it your own retirement? Are you saving for your children’s college education? Do you plan to move to an exotic island before you are 50? Prioritize and be reasonable in what you plan to do. 

Watch your investments. Communicate with your financial adviser on options that may develop. Do not depend on a company retirement plan. You may have several different jobs during your working career, and the retirement plan may not follow you. 

If a company pension comes your way, you are ahead of the game. However, if it disappears, you can still be in good financial shape if you start early in planning for the future.

3 Smart Investments

One of the major contributing factors to the economic crisis of 2008 was the lack of personal savings. Easy credit was a way of life through the early 2000's up until the crash, and consumers used that credit to fuel consumption. When the market tanked, wages dropped and jobs were cut, leading to a nasty decline in consumer purchases. Many of the newly-unemployed had no savings upon which to draw in order to maintain their level of spending. For those with adequate savings, however, the situation was much less dire. While you cannot prevent a widespread economic disaster, you can organize a plan to be prepared no matter the situation.

Traditional IRA or Roth IRA

An Individual Retirement Account (IRA) is a legal construct of the Internal Revenue Code that allows investors to shield their savings from taxes. There are two forms of the IRA. The first form is a Traditional IRA, which allows savers to fund their retirement account with pre-tax dollars. Essentially, if you put money into a Traditional IRA, you can deduct that amount from your taxes. You can continue making annual contributions to your account and you won’t pay taxes on it until you start withdrawing from the account in retirement. The second type of IRA is the Roth IRA, which takes contributions of after-tax dollars. This means that when you withdraw from your Roth IRA in retirement, you will not pay any taxes on it. Also, the Roth IRA has more flexible rules for pre-retirement withdrawals from the principal. One of the great things about both types of IRA's is that you can put whatever investments you want in the accounts: stocks, bonds, real estate, baseball cards, etc.

Index Funds

Many investors think that stocks are the best way to make money over time. While that can be true, this strategy only works if you pick the correct stocks; if you pick the wrong stocks, you can lose your entire portfolio overnight. Unfortunately, many experts believe that it is impossible to reliably pick the correct stocks over time. Even if you do pick the right stocks, you have to buy them and sell them at the right time. One commonly-used strategy is to invest in mutual funds, which are managed by professionals who charge a fee and take a cut of the earnings. The problem is that most mutual funds do not consistently beat the market. Even those funds that do outperform the market will eat away at your gains with their fees. A good alternative is to invest in an index fund. An index fund is a fund that consists of stocks from a stock index, such as the Dow Jones Industrial Average and Standard & Poor's 500. These funds are meant to track the economy as a whole, which consistently outperforms most mutual funds. Even better, index funds have much lower fees than a typical mutual fund, preventing the erosion of your investment.

401(k) Matching

One very common financial mistake happens when employees who are eligible for 401(k) matching by their employers do not contribute up to the full match. For example, imagine a 401(k) match of 50% of employee contribution on up to 6% of the employee’s salary. This means that your employer will put fifty cents in your 401(k) for every dollar you put in on up to 6% of your salary. If you make $100,000 per year, 6% of your salary is $6,000 and your employer will contribute up to half of that, which comes out to $3,000. If you do not contribute at least $6,000, you are literally turning down free money from your employer!

Investments can be confusing and dangerous. A few wrong moves and you can delay or even eliminate your retirement. There are no guarantees in life, and even fewer in investing. However, if you invest in IRA's, index funds and 401(k) matching, you are definitely giving yourself a major advantage.

Ken Myers is a father, husband, and entrepreneur. He has combined his passion for helping families find in-home care with his experience to build a business. Learn more about him by visiting @KenneyMyers on Twitter.

The Necessity of Individual Retirement Accounts

retirement (Photo credit: 401(K) 2013)

Even if you have quite a long time before you retire, it's never too early to start thinking about a plan. When that day comes, you want to make sure you have enough money saved up and that you are able to live comfortably. What are the benefits if individual retirement accounts, which are sometimes referred to as IRAs?

An Individual Plan

Not everyone has the same needs, and you want to ensure that your personal ones are met. By developing an IRA, you can work to craft a plan that makes sense for you and addresses your personal and financial needs. When you take the time to sit down with a certified financial planner and come up with an individual retirement account, you are being smart about your future. Specifically, you will be able to work toward attaining a specific amount of money to have reserved for you when you retire. In society at large, these accounts allow people to develop a greater sense of personal responsibility.

Personal Responsibility

Let's explore this concept of personal responsibility a little bit more. It is clear from the state of the economy that many people and government entities are not great with money. Therefore, it's also smart to take some steps to amplify your knowledge and to learn more about where your money goes and why it's important. Taking the step to have an IRA, regardless of the specific type, means that you are putting personal stake into your financial affairs and working toward a plan that works for you.

Tax Options

You likely want to know about taxes on these accounts, and CNN Money's article, "Retirement: IRA Investment Advantages" discusses them in detail. The article writes, "There are two types: a traditional IRA offers tax-deferred growth, meaning you pay taxes on your investment gains only when you make withdrawals in retirement, and, if you qualify, your contributions may be deductible...A Roth IRA, by contrast, doesn't allow for deductible contributions but offers tax-free growth, meaning you owe no tax when you make withdrawals in retirement." You don't need to be told that both of these situations are rather desirable.

Withdrawing Money

The end of the article notes, "Further, if you need the money before retirement, there are more opportunities for penalty-free withdrawals." Ultimately, the goal here is to save up as much money as possible before retirement so that you do not have to deal with financial burdens later in life. However, sometimes situations do arise, and you just need to have the cash available now. When that happens, you can turn to your IRA and take out some of the money to help get you through. Since it's your personal account, you do have the freedom to do that.

Working toward an IRA is really a smart idea. Whether you have just entered into the workforce or you are thinking about retiring soon, it's smart to start making a plan that can be really beneficial to you and your financial situation.

Author Jason Harter is a retired accountant who can happily say that he has all of his retirement accounts in proper order. He obtained his Online Bachelor's in Accounting Degree.