The Basics of Retirement Investing

When it comes to investing for retirement, there is no one-size-fits-all approach. There are, however, certain things that everyone should consider when it comes to choosing how and where to invest.

Take the Long View

Investing for retirement is a long-term proposition. Unless you’ve already met and surpassed your retirement-savings goals, this advice is foundational when it comes to investing in stocks. While it may be tempting to try to cash in on short-term purchases of specific stocks, or assets such as cryptocurrencies, it’s incredibly difficult to time such investments just right. Instead, investments in equities should usually be made with plans to hold them long-term, and that means buying and holding stocks through market turbulence. Though fears surrounding the onset of the pandemic sent markets plummeting roughly 30% in March of 2020, the wise move was to ride through that turbulence. Just a year later, stocks within the S&P 500 had made nearly 100% gains from the lows they hit during the initial COVID panic.

How Age Influences Investments

Your age should determine your investment approach. As anyone who has ever invested in a 529 college savings plan knows, the age of a child determines how aggressively your money is invested, with more risk taken when a child is young and less risk as college gets closer. The same holds true for saving for retirement. If you’re only at the start of your career, with several decades of income and savings ahead of you, your investments should include a higher percentage of stocks and riskier investments with the possibility of higher payouts. As you get closer to retirement, the makeup of your investments should shift toward more conservative and safe investments such as municipal bonds and annuities. While the interest you earn on these types of investments is not as high, you’ll better know where you’ll stand financially when you ultimately do retire. And if you still have several years before retirement, and don’t have a mortgage or college payments to make, you should try and step up the amount you’re investing for retirement given the power of compound interest.

The Best Time is Now

If you haven’t yet started investing for retirement, there’s no better time to start than now. Even children can benefit from a custodial IRA opened by their parent or guardian. While postponing large purchases until you’re in a better financial position often makes sense, it never makes sense to put off investing for retirement, particularly if you can do so without impacting your day-to-day financial needs. Waiting for the perfect time or the perfect market conditions can be tempting, but the sooner you begin investing, the more time the money you invest will have to grow and the more likely you’ll hit an upward moving market — as people who held onto their investments throughout the entirety of the pandemic have now seen. If you work for an employer with a 401(k) plan that involves matching, try to max out the amount that you’re able to contribute for the match, as failing to do so means leaving money on the table.

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