If you want to retire some day, like you say you do…it will take a real commitment from you to prepare for your retirement, financially speaking that is.
The investment choices are there for you; IRA’s, 401k retirement plans and annuities, just to name a few. However, your investment choices may be the easier part, the more difficult part of preparing for that day when you retire is your commitment to planning and preparing. The commitment has to come from you.
7 Steps To Making The Commitment
Step #1: You have to believe.
- You have to believe that investing and the process of investing will work for you.
- If you do not believe in the power of investing and the power of compounding, you will not make a commitment.
- You have to believe that dollar cost averaging and portfolio diversification will both make a difference in building your financial future.
Step #2: Why Compounding is Great.
- If you invest at an early age, you earn money on your money.
- If you start investing at an early age, you will have to invest less money over the long run.
Step #3: Why Dollar Cost Averaging works.
- When you dollar cost average, you are buying at different prices.
- Dollar cost averaging means investing the same dollar amount on a regular interval, regardless of whether the market is up or down.
Step #4: Why Asset Allocation and Diversification works.
- If your portfolio is properly diversified, you will get a more balanced return on your investments.
- In theory, when one segment of the market is in an upward swing, the other segment is in a downward swing.
- A diversified portfolio will balance out the market swings for you and your investments won’t be impacted by the wild market swings.
Step #5: Maxing & Matching Your 401k Retirement Account.
- Maxing out your 401k retirement account whether or not your employer matches is a smart investment move.
- Your 401k retirement account investments are tax-deferred.
- Your 401k retirement contributions will lower your taxable income the year you make them.
- If your employer does match, great, that’s just free money.
Step #6: Invest In Other Retirement Investments.
- Invest in an IRA if your income level allows for it.
- Don’t put all your eggs in one investment basket by just investing in a 401k retirement account.
Step #7: Prepare For The Future
- If you have children, starting a college fund when they are young so that you do not have to dip into your retirement savings account when they are ready to go to college.
- Remember that you can get a college loan, but you cannot get a loan for retirement, not yet anyway.
Your financial needs will change as your life changes; however, your retirement savings need will not change – – – – you still need retirement savings to retire some day.
If you haven’t saved enough money by the time you want to retire, you will only have one choice…you will have to keep working.