Retirement Investing for Beginners

People are living longer, and that means that you’re more likely to need more money for retirement. Of course, living a longer, healthier life means many people will want to work for longer as well, but wouldn’t it be nicer to do that because you want to and not because you need the money? Thinking about saving for retirement can be overwhelming, but the steps below can help you get started.

Find the Needed Funds

First, you’ll need money to put toward retirement. If your work offers a retirement plan, there may be other important perks as well, such as matching funds, so you don’t want to miss out this opportunity even if you are young and not earning much. The money you put away now has the potential to compound significantly over the decades. If you are tempted to neglect saving for retirement because money is tight, you should find a way to free up at least a little each month.

This may not be as difficult as you think. For example, don’t assume that you can’t afford retirement because you are paying off student loans as well. You may be able to refinance your student loans and pay less each month. This will have the dual benefits of helping you dig your way out of education debt and freeing up cash you can put toward retirement.

Have a Goal

A general rule of thumb says that you will need between 70% and 90% of your income when you retire, but a better way to figure this out for yourself is to think about the kind of lifestyle that you want to live after retirement. For example, you may want to move to a place that has a much lower cost of living. When you are thinking about how much you need to save, be sure to also factor in what you will get from Social Security.

Choose Your Plan or Plans

There are a lot of different options here, from an employer-sponsored pension plan, 401(k) or similar plans to various types of IRAs to plans for small businesses and the self-employed. You may want to talk to a financial professional about the best strategy for you, but it is usually a good idea to sign up with a plan offered by your employer. You can open an IRA to either supplement that or if your employer does not offer any retirement benefits.

Choosing Your Investments

As a general rule, when you are younger you can afford to be more aggressive and make riskier investments. As you get older, you generally want to be more conservative or at least avoid putting anything you can’t afford to lose into riskier ventures. Keep in mind that investing for retirement is a long game. You should keep an eye on your investments, but you shouldn’t worry about fluctuations in the stock market. Ups and downs to some degree are normal and are generally not a reason to scramble to make changes in your investment strategy.