There are many options for investing for retirement including traditional retirement plans, Roth IRAs, SEPs, 401k and more.
Top retirement investment strategies include:
Invest the maximum that a retirement plan allows every year. If possible invest the allowable maximum amount into your 401k, Roth or other plan every year that you have income. The 2019 401K maximum contribution is $19,000. The maximum 401K catch-up contributions for those over 50 years old is $6,000 above the $19,000 contribution limit in 2019. If your income allows your 2019 contribution can include up to $19,000 into a 403(b) Tax Sheltered Annuity (TSA) and an additional $19,000 into a 457(b) Deferred Compensation Plan (DCP), for a total of $38,000. Those over 50 can contribute an additional $12,000 into the two plans for a total of $50,000.
Invest as early as possible and be consistent. Try to contribute to a retirement plan starting as soon as you generate income and invest every year even if you cannot invest the allowable maximum amount. An annual $6000 contribution generating approximately 5% per year beginning at age 25 will total to nearly $725,000 when you turn 65. Making the same annual contribution at age 45 generating the same 5% per year will return under $200,000 when you reach 65.
Take advantage of matching funds provided by your employer. Many employers offering matching funds to employee contributions made to company retirement plans. The matching contributions range from fixed company contributions to graded contributions. Some company plans require a vesting period, others do not. Whenever a company offers a matching contribution an employee should take full advantage of that offer. A matching contribution can provide a substantial increase to your retirement nest egg.
Asset allocation is important. Allocation of assets should vary depending on several factors including your age, other available financial assets and your tolerance for risk or your risk aversion. Typically the younger you are the more time is available to recover from periodic recessions or depressions and thus a more aggressive stock heavy portfolio may be worth considering. As you age more of the assets can be allocated to fixed income vehicles such as bonds, cds, etc. Many financial advisers have adopted a very simple allocation rule based on the subtraction of your age from 100. For example when you are 35 65% of your portfolio should be in stocks and 35% should be invested in fixed income. Like wise if you are 65 35% should be in stocks and 65% in fixed income. This rule may too simplistic discarding the recent very low returns of fixed income vehicles and over estimating the risk of stocks.
Diversification and balance can reduce risk. It is important to diversity your portfolio to provide a measure of balance and reduce risk. Investing in a single stock or in only a particular sector may result in higher losses should that stock or sector take a hit.
Know the fees associated with your transactions. Over time fees can add up reducing the actual returns on your investment. Before investing be sure to review the purchase/sales fees, loads on various funds, etc.
Invest based on the facts not emotions. Some investors have a tendency to become “attached” to their investments. This may result in unnecessary losses. Purchases and sales should be based on facts relating to each investment not emotional attachments. Research and an understanding of factors that may affect prices are paramount.
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Retirees make up the primary demographic of discussion community ValueForum.com, where income generating stocks are constantly being shared and debated. Check out their stock message boards for some great income ideas.
As with all information on this site the above is provided as general information and not advice or direction for your investments. Seek professional advice for your investments.