The Basics On Stock Investing In Retirement
Before you start stock investing in retirement you need to understand your financial picture. Everyone’s financial picture is different, to understand your own you will need to do some homework and soul-searching. You need to know what type of investor you are, how much money you will need to live on and how much money you can comfortably afford to lose.
Is Stock Investing In Retirement Right For You
Stock investing in retirement is not right for everyone. Are you comfortable with risk? Will your investments make you nervous? Do you feel compelled to constantly check the price and rate of return on your stocks? How much of your retirement money are you willing to lose if the stock market tanks? How long can you wait for a stock market rebound?
These questions are personal and need to be addressed if you want to stay retired. Yes, the stock market can produce fantastic returns; but, it can also drop so low in value that you end up losing more money than you can afford to. Most retirees living on a semi-fixed income feel the strong need to be more cautious with their investment money unless returning to work is an option if they run out of money.
Safe investments do exist; they are called cash investments (certificates of deposit, savings accounts and money markets). The rate of return on these safe investments will not make you rich, but you will not lose your principal either. Learn your tolerance for risk before investing too much of your retirement nest egg into the stock market.
Your Financial Needs
Stock investing in retirement can be a good thing if you can afford it. Before investing in the stock market, determine if you have built up enough of a financial cushion to meet all living expenses.
Detail Your Expenses
Be ultraconservative when making your expense list. You will do yourself a disservice if you do not include everything: credit card debt, your mortgage, real estate taxes, utilities, home and auto insurance, home maintenance expenses, food, entertainment, medical expenses, emergency money for unexpected car repairs or a new roof or a major appliance.
Money With No Worry
If you have money left over after you have met all of your expenses you can make a fun money category on your spreadsheet. If you can stomach the market gyrations, your leftover money is money that can be invested in the stock market with little concern about the rate of return it generates. This is the point where you can experience stock market investing in retirement while still maintaining your standard of living.