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Easy retirement investment options for reluctant investors

Most people are reluctant to talk about their investment plans to support their retirement. The issue, however, is something that needs to be confronted regardless of age and position in the corporate ladder.



Retirement planning involves the daunting task of identifying what you want most out of your life, especially if you’re on your mid-20s or barely in your fifth year being an employee, most particularly if you’re already hitting your big 40.

At whatever point you are in your life right now, one thing is certain: You won’t be working for the rest of your life. You need to think about when you plan to retire, where you would stay and how you would spend each day of your retirement.

Nobody is too young to think about long-term financial security, neither anybody is too old to think that it’s too late to plan for financial freedom.

Once you take your first step toward considering retirement investments, you’ll find there are many options available. In fact, there are too many—stocks, mutual funds, company shares, annuities, bonds, employer-sponsored investment plans, dividend income funds, total return portfolio, real estate, and the list could go on—you might find yourself taking one step back once more.

This article, however, will guide you through the first few introductory steps you need to take to make you better equipped in understanding more complex investment plans that may come your way as you prepare yourself to take the plunge.

First thing first, pay off your credit cards

There’s no point jumping into a new financial journey if it would only add up to your economic burden. Unpaid credit card debts pile up in interests after interests. It will be pointless to invest in company shares or bonds or what have you if you’ll only be using your earning to pay for your debts. Motley Fool presented a sound example: There’s no logic earning 10 percent to 15 percent from the stock market while you also pay 15 percent to 30 percent annual debt interests.

Maximize your employer’s retirement plan

Most employees deduct from paycheck tax-deferred or tax-free retirement benefits such as theIRAs and 401(k)s. While these options already come handy for most employees, Forbes recommends that employees voluntarily contribute more to what their companies pay. Workers can either choose to have an “auto-escalation” or a “contribution rate escalator” that allow employees to increase their contributions gradually over time, according to Forbes.

If the options are not available in your company, you can opt to match what your company is paying and save it in your personal account.

In case you’re moving from one job to another, Motley Fool advised against cashing your retirement money. The best option would be, and Forbes has also sworn by this, to roll over the funds in your 401(k) into an IRA. Another option will be to request your old company to directly transfer the 401(k) to your new 401(k).

Avoid cashing in your retirement money, but instead to roll over the funds in your 401(k) into an IRA. (Source)

Always treat your 401(k) as if it was non-existent. No matter how you’re in dire need for funds or extra cash, do not withdraw or borrow from this account.

Build your nest egg no matter how little you can afford

Whenever the topic of savings comes up in any conversation, the tendency of most people is to think about accumulating hundreds or thousands worth of savings right of the bat. Many financial experts will tell you that when it comes to savings, any amount will do.

You can put away as little as 1 percent off your monthly salary to start with. However, bear in mind that this amount should increase gradually. Increase it by 2 percent the next year, 3 percent in the next, until you’re easily putting away 10 percent off your monthly salary in the years to come. Before you know it, your nest egg has already doubled or tripled your annual pay. Consistently doing this may even see your nest egg growing to 10 times your yearly pay the moment you retire.

Identify the amount you need for a retirement fund

Calculating how much money is needed for your retirement is a crucial step in planning as it factors in longevity and inflation. As a preliminary step, you can use a retirement estimator to calculate for this. For a logical calculation results, Forbes recommends using 3 percent inflation rate, a life expectancy of 90 or higher and average annualized investment returns of 4-6 percent. The latter depends on how you are committed to making the investments.

Start with company stocks to boost your nest egg

Many employers allow employees to own stocks in the company. This is a good place to start with especially that your own company is the first stock you can examine in and out. But, remember not to spend all your money on your company’s stocks.

Once you know the “tricks of the trade,” you’ll be ready to diversify to other channels that will expand your nest egg. You can venture in both local and international shares because there are aplenty. There’s also an option to invest in large-cap, mid-cap, and small-cap companies and so on.

It’s never too early, it’s never too late

Planning for retirement is something that needs to be confronted no matter where you are at your life right now. While looking ahead for the next 30 to 65 years seems to be an overwhelming task, you have to at least take the first few steps toward long-term financial freedom. After all, nobody dream about living his whole life staring at the four corners of his office wall.

(Featured image by DepositPhotos)

Sharon Harris is a feminist and a part-time nomad. She reports about businesses primarily involved in tech, CBD, and crypto. She started her career as a product manager at a Silicon Valley startup but now enjoys a new life as a personal finance geek and writer. Her primary aim is to provide readers with a new perspective on the overlapping world of finance and technology.