Saving For Retirement

Saving for retirement is essential for anyone who hopes to have a comfortable life in their winter years. Pensions often don’t provide enough for retirees to live the lifestyle they wanted during retirement. Social security – assuming it doesn’t disappear – provides a meager living, at best.

If you do not yet have any money saved for retirement, today is the day to begin. Yes, even if you’re only twenty years old. In fact, if you planned for your retirement that early, you woul find yourself with a huge nest egg by age forty!

And if you’re fifty-five and have not begun this crucial step, take heart! With some sacrifice and wise decision-making, you can have enough to live on for the rest of your life by age seventy.

So, when you’re saving for retirement, what’s the best route to follow? The rest of this article lists the most common methods people use to build their future wealth.

1. Savings accounts.

If you start saving really early, and make a HUGE income, this is definitely one of the lowest-risk ways to build wealth. You never lose any money, and can withdraw from the account at any time without any hassle.

However, these days, with bank accounts paying slightly more than nothing, this vehicle is a bad choice for the average wage earner.

2. Certificates of Deposit and Money Market accounts.

Putting money into CDs and Money Markets is also low-risk. But like savings accounts, the current rate of return is not enough for the average person to accumulate enough wealth to retire comfortably.

3. Annuities.

An annuity is an investment product that guarantees an eventual fixed payout for people over a certain age, beginning somewhere between fifty-five and seventy years old.While the value will never go down, and while it earns two to three percent more than long-term CDs, it still has a very low rate of return.

If you can sock several thousand dollars into it every month, it may provide you with the retirement income you hope to have. If not, you are better off investing in mutual funds (description coming up) while you are working, and moving that accumulated wealth into an annuity once you reach the official retirement age.

4. Individual stocks and bonds.

This kind of investing is not for the average wage earner. To be successful at this game requires a lot of learning, a lot of practice and a lot of risk. If you have the time, money and inclination to apprentice with the rare person who has built wealth doing this kind of investing, it may be worth considering. If you don’t, move on to the following option.

5. Mutual funds.

Anybody who is serious about saving for retirement in a big way must make mutual funds a hefty part of their financial portfolio. Although they pose a risk if you’re hoping to make large short-term gains, there are many stock mutual funds that will average at least a twelve percent return over a ten- to twenty-year period.

And with mutual funds the only work you have to do is deposit money. Each fund is managed by a team of market and financial experts who will make all the trade decisions for you. And they will generally do a terrific job. If you want a mutual fund that is a bit more on the conservative side, select bond mutual funds. Just realize that the gain will be considerably lower than stock mutual funds, although usually still higher than the first three options mentioned above.