Retirement Planning Inexperience
Fact: Need Money To Retire
If you reach retirement age without enough money you will have two choices, 1) keep working or 2) just retire and live on a lower budget. Neither choice sounds that desirable.
Fact: Money Needs To Be Invested
If you have never invested before and do not understand investments do you jump into the market or stay out and hope for the best? Hoping for the best is not a good alternative; learning how to invest is a better one.
Fact: Your Retirement Income Needs To Last 30 Years
Most people spend 30 years in retirement. If you want to create a stream of income to last as long as you do, maximize your working years to prepare for retirement.
Follow The Money
Due to the greater potential for a better rate of return, the best way to save for retirement is by investing your money in the markets; either through mutual funds or buying stocks and bonds directly. With better earnings your retirement investments will grow faster and stronger.
A safer retirement investment alternative would be certificates of deposit or money market accounts. Safe investments have low risk so lower rates of return. The return on these type of investments would not even keep up with inflation let alone grow your portfolio large enough to support your 30 retirement years.
Learn The Markets Rhythm
Markets go up, markets go down; that’s the market rhythm. Unending negative market slumps should not be discouraging; however, inexperienced investors do become discouraged because they are unfamiliar with these cycles. You may be one of those investors who pull out and stop investing altogether.
Constantly battling the volatility of the stock market may have become a difficult challenge for you, but completely dropping out of investing would not be a good financial move.
Hope Is On The Way
If you tend to lose confidence in your ability to ever save enough for retirement due to under performing investments, did you ever consider adjusting your investment strategy?
You do not have to rely upon aggressive investments to achieve your retirement investment goals. You can use a softer approach and achieve the same results over time.
To help offset the declines in your retirement plan account, consider switching to high paying dividend stocks and even an index fund. These type of investments reduce your risk because they reduce the exposure to market fluctuations. Dividends are consistent, steady and reliable. Index funds match a particular index such as the S&P, the fees are lower and the investment turnover is lower which reduces the risk of the investment.
Have No Fear
You can do anything you put your mind to. If you are nervous about investing and want to learn more before jumping in, work with a financial adviser just to learn the ropes.