When you are young, retirement seems a long way off. When people tell you that you need to save for those years, it’s easy to ignore the advice. After all, you do not have much money to start with, and you need to be able to live today. Why think about tomorrow?
The truth is that you are not going to be able to rely on social security to help you out in the future. For many years more has been paid out in social security to retirees than has been acquired through taxation. A back up of reserves had been built up to cope with the increased demand, but this is due to run out by 2033. The simple truth is that if you want to be able to survive in retirement, you need to start investing now. But, how do you do it?
Starting with the safe option
If you are one of those people to whom saving and investing has been an alien concept, you may want to start by at least saving some of your income in a savings account. Dealing with a bank can seem like a less scary option than negotiating the world of stocks and bonds. You can find information about different banking institutions on sites such as honestlynow.com. You do not have to set up a savings account at your current bank; it’s a good idea to shop around for the best rates, so that you can help your money to grow as much as possible.
The pros and cons of investing in stocks
Keeping your money in a savings account is a safe option, but it’s never going to secure you a decent profit. Many people choose to supplement any 401(k) provision they have, by investing in stocks. If you are attempting to create a fund for your retirement, this can be a good option. According to a Gallup poll conducted in 2016, only 52 per cent of Americans have an investment in stocks; a record low.
Part of the reason for this may be the reluctance of millenials to choose this as an investment option. According to research by Bankrate.com, in 2016, only one in three millenials had invested in stocks. One of the biggest reasons for this, as quoted by those questioned, was lack of knowledge about stocks.
The truth is that the longer term your goal is, the more you should choose stocks as an option. This type of investment can be volatile, and any losses cannot always be made up in the short term. But, over a longer period of time, you should be able to secure good returns from investing in stocks.
Other investment options to help you reach your goal
If you do not want to take the risk of individual stock picking, index fund investment is a good choice. It’s also a simple and affordable option for anyone who is new to investing. In June 2017, CNBC ran a report extolling the virtues of this investment option. The potential gains are not as high as with choosing individual stocks, but the risks are less. If you place your money in an index fund, you can leave it there until you retire, and you should have built up enough money to live your life in a comfortable manner.
Depending on the amount of money you have to invest, you may want to think about property investment as an option. You can either buy property to renovate and sell on, or you can buy to rent. If you make the right decisions regarding which property to buy, you can make decent returns. You are probably not going to make a huge amount of money straight away, but over time, you can build up an impressive property portfolio.
The most important thing to remember about investing is that it’s never too soon to start. Even if you only have a few hundred dollars, you can at least make sure you choose a good savings account. Then you can think about taking a look at some of the other investment options we have suggested in this article.