Happy Finance Friday! Who’s ready to leap into April?! Me! Before I jump into all of the wonderful new adventures to come this season, I want to make sure I check on my investments and conduct a review of my retirement accounts. My goal is to retire early and spend my latter days really enjoying the fruits of my labor. Lately, when I discuss saving up for retirement with my peers and pals the same questions keep popping up…
I’m in my 20’s that means I’m too young to invest, right?
Of course not! You’re never too young to start planning for your future. Let’s face it, the average life expectancy for women in the U.S. is 81, 78 for men, so we’ll be around for many years to come. Why not start stashing away for long-term living. You’ll thank yourself later!
While we’re young, we have the opportunity to take risks and be more aggressive with investing as opposed to playing catch up when we approach retirement. Investing early is a fundamental step in wealth building.
How do I invest and where do I begin?
Most people begin investing with a company sponsored employee plan, 401(k). Many employers will match you dollar for dollar up to a certain percentage as a part of their benefits package. I recommend contributing 15% of your household income towards retirement. 401(k) plans come with a tax deduction at the end of the year, and the money you contribute is considered pre-tax dollars. This means you will pay taxes on this money upon retirement or if you withdraw funds from your IRA early.
If your employer does not offer a retirement package, you can open a Roth IRA with a financial institution. With a Roth IRA, you will contribute after-tax dollars to your retirement account. Upon retirement, qualified distributions from your Roth will be tax-free. Look at it this way, you already paid taxes on the money beforehand so Uncle Sam doesn’t hit you twice!
If you’re self-employed you can still contribute towards retirement by opening a SEP (Simplified Employee Pension), and like 401(k) plans, SEPs also receive a tax deduction. I recommend contacting a financial consultant who really understands the ends and outs of SEP accounts before setting one up on your own.
Who can I trust with my investments?
You can trust trained financial professionals to help you with your investments or a wise financial mentor. The best way to find a good financial representative is through word of mouth. It can be difficult to build, establish, and maintain a relationship with a stranger. Especially when they are responsible for handling your life’s savings. Investing is risky business but it’s essential for financial planning. The higher the risk the higher the return.
Think of investing like riding a roller coaster. With every good ride, there are highs, lows, bumps, and turns. You have to hold on, close your eyes, say a prayer, and just ride the wave. Don’t be discouraged by what you see on TV or read online about the economy. Research shows, markets always bounce back. You may have to shift your investment strategies or opt-out of specific plans but try not to pull out completely. I know it’s easier said than done but unless you have a major financial emergency and need to tap into your investments, I’d recommend sitting tight. After all, good things come to those who wait!
While saving up for retirement make sure to check your investment account(s) periodically. It’s important to track your progress and get a game plan for success! Remember the younger you are the more aggressive you can be, so don’t be afraid to take a few risks. We have plenty of time to recover. Don’t hesitate to ask questions and when in doubt hire a professional!