Saving and investing money for retirement is one long-term goal that is held by many of us. How old you currently are, and how many years you have until you will be retiring are the two biggest items to consider when deciding how much money to invest, and which investments to go with. The younger you are and the more years you have before retirement, the more comfortable you will be with more aggressive, and therefore more risky, investments. Things like stocks and real estate investments might be a great idea if you have the time.
There is a useful method for determining how much of your money should go to conservative investments and how much of your funds should be invested in higher growth products. You should subtract your age from 100 (or, if you want to be more aggressive subtract if from 120) and invest the resulting number as a percentage of how much of your allocated funds you should put towards stocks. The other money should be put into bonds. It may sound simplistic but it’s a way to make sure that you stay on track and you aren’t disappointed when you get to your retirement and find that you didn’t properly allocate your funds. Let’s see how it works:
For example, if you are thirty years old, you’ll want to invest 70% of your investment money into stocks if you want to be conservative. If you want to be more aggressive and can tolerate more risk, you would want to put 90% of your funds into stock and the other 10% into bonds.
In most retirement plans offered at employers they will use mutual funds as the typical investment strategy. If your employer offers more than one mutual fund you’ll want to do a bit of research to find out which one meets your criteria more. Choose the one that goes along with your calculations and seems to fit your goal and your comfort level. Not all mutual funds are created equal, some are inherently riskier than others. Don’t be afraid to allocate some of your stock fund monies to overseas investments in the form of an international stock fund.
In the past, employees didn’t have the chance to determine their own investment decisions when it came to retirement money. These days, employers are leaving most of these choices up to the employees, and forgoing traditional pension plans. The only problem with this is that the average employee is a novice when it comes to investing. If this applies to you be sure to do as much studying and catching up that you can. Get advice from trusted sources and get second opinions on important decisions before you invest.