A survey conducted by Bankrate recently fount that over 30% of people between the ages of 30 and 49 haven’t even started saving for retirement. If you fall into this bracket, the sooner you start to invest, the better! Why, you ask? Because you are also earning the bulk of your income between your late 30s and mid 50s.
How do I start? What should I do? No worries, I’ve got you covered. Here are my top four tips for helping you make the most of investing before retirement.
- Set up a financial plan: You can do this yourself or use an advisor, but often advisors can help keep you on track when you would be tempted to buy that new car you don’t actually need.
- Invest in the stock market: If you are in your 30s or 40s, invest in moderate risk stocks. If you are in your 50s or 60s, invest in low risk stocks. Also, make sure to diversify your holdings. Don’t JUST focus on stocks. Make sure to also invest in things like bonds and real estate. People who retire with seven or more types of investments have an average net worth of $1.4 million while those with three or less types of investments have an average of about $670 thousand.
- Prioritize retirement over college: I want to help my kids pay for school you might say. But let me put this in perspective, you can borrow money for college, you can’t borrow money for retirement. Plus, your kids can also receive scholarships and grants for their schooling. If you want to start a savings plan for your kids as well, go ahead. Just make sure that you aren’t sacrificing your own retirement plan for their schooling.
- Switch up your investment goal as you age: When you are in your 30s and 40s make sure that your goal is to grow your capital. You will have a slightly more aggressive approach than when you get older. Once you reach your 50s, you should shift your investment goal to conserve your capital. Start shifting to safer stock options. The last thing you want is to watch the risky company you invested in to go down the tubes.
Ultimately, if you are currently 40, follow the above steps, and invest about $1,500 a month at a 6% annual return you can be a millionaire by the time you reach retirement! It might not be easy, but I believe you can do it!