3 Ways You Can Invest for a Great Retirement

No Better Time to Start then Today

With the corona virus going on, you may have forgotten to start investing in your retirement which is right around the corner. If you haven’t started, this is as good of a time as any to get started. This crisis may have thrown you off track for a bit, but it’s time to refocus. Retirement is right around the corner and you need to start planning for that.

In the United States, approximately 55% of people invest in the stock market according to a Gallup poll. As of December 2019, there are 330,000,000 citizens according to the census so roughly half of these individuals are not invested in the stocks. Hopefully, these people have another investment that they can dip into during retirement.

It’s true that some people have a retirement plan from their company. The US Census Bureau estimates that one in three Americans invest in a 401K plan. You may have a 401 K, a Thrift Savings Plan (TSP) for federal workers, or a similar type of retirement plan from your company. Roughly half of those who have retirement plans, these workers are not fully invested to cover their retirement according to Edelman Financial Engines (EFE). EFE oversees almost 300 public and privately held companies.

Fidelity estimates that couples need $285,000 invested to cover their pre-retirement and medical expenses. This number varies for everyone depending on their lifestyle and health needs. As of June 2020, 38% of 60 to 69 years olds, have less than $100,000 saved for retirement according to CNBC.

Social Security

Can you live on $1400 a month? Well, that’s the average amount people receive on social security. For 24 states, retirees average less than $1400 a month, and three states average above $1500 a month. No state averages $1600 or more. There will be some people who make more than the average and they likely had a bigger income during their working years.

If you have your home and your car expense are paid off, $1400 would be manageable but a little tight. This wouldn’t leave a lot of leeway if you wanted to travel every month.

Delaying your social security can work in your favor. The longer you wait, you’ll receive more from social security.

The image above is only an example and does not guarantee this is how much you will make at that age. Social security is based on how much you earned while working. So your benefit may be higher or lower than what is shown.

Social Security Is Not Your Retirement Plan

If your country has a retirement plan for you, you always need a second retirement plan since the first one may not always be enough. Social security is the same way. This doesn’t make sense but social security was never meant to cover you until your 80s and now we see people are living past 100. In 1950, Americans were expected to live to 69 years old according to Wikipedia.

With people living longer, there is a greater chance you’ll spend more time under medical care which can get very expensive.

Take the time to practice delayed gratification and fund your retirement. Many people stop working around 62 years old and that is also the earliest they can claim social security. This is also the most popular age that people file.

The longer you wait to claim social security, the higher your social benefits will be. As of this year, if you wait until you’re 70 years old you will receive the maximum amount possible.

The Earlier You Invest, the Better You’ll Be in Retirement

If you started investing early, that’s great. This will pay off later in life. If you haven’t started to invest, don’t worry. You still have time.

The IRS or Internal Revenue Service allows you to invest more money when you’re 50 years old in an individual retirement account. Up to age 49, you can invest up to $6000 a year or $500 a month. At age 50, there is a catch-up provision that allows you to invest up to $7000 a year or $583.33 a month.

The earlier a person invests, the longer time their money will compound and grow. The money you invest is always increasing though there will be periods when the market takes a dip or suffers a crash. This is when you want to be patient and let your money stay invested since the market usually returns to where it was before.

I always think of investing as a roller coaster ride. What goes up, must come down only to go back up again. This is the same way with investments. Your investment will go up, go down, and then go back up again. So if you are not an experienced investor, its best to leave your money alone and not pay attention to the constant fluctuations of your investment.

Better Late Than Never

If you haven’t started to invest, this is as good of a time as any to start investing. Retirement is one area you can’t get a loan for.

Make sure you have your priorities in order. Some parents may want to fund their children’s college but priority should go to their retirement account first. Students can always get a loan or two and have time to pay this off.

Trying to get a loan for retirement is very unlikely. As I have mentioned before, you need to pay yourself first. Allocate part of your income to your retirement just as you have to pay your mortgage, rent, car, and phone bill. Investing should be a requirement for you.

Options for Investing

You may be thinking, you need to invest but have no idea where to go. Today there are so many options available. You can work with a financial professional or you can invest on your own.

Stock Broker or Bank

You could always go to an investment broker through your bank or a financial institution such as Merrill Lynch, Charles Schwab, or Fidelity which are options. Technology has changed that recently and allows people to invest from their computer or phone.

Some independent financial brokers are Robinhood, WeBull, or M1 which all offer zero-based trades. So you can make your trade without incurring a fee.

S&P 500

Most stock analysts even those with years of experience have a hard time trying to beat the market. So an easy option is to invest in the S&P 500 which tracks the major stocks of today. S&P 500 stands for the Standards & Poors 500 which holds the largest 500 companies on the New York Stock Exchange or NASDAQ. The companies in the S&P 500 are leaders in their industry.

Instead of trying to beat the market, just invest in what the market is currently doing. One of the greatest investors of our time, Warren Buffett, he recommends this.

Individual Stocks

If you have the time, then you can study up on individual stocks. Depending on your age, this can be riskier since retirement is right around the corner for you. So I can’t answer this for you.

Take the time to learn to focus on investing for your future. Whether your country has a retirement plan or not, you need your own retirement plan.

I have written a few articles on the best stocks which will give you some options if you want to invest in individual stocks.

Do you have your personal retirement plan?

Tom Handy is a top Investment and Bitcoin writer on Medium, and the father of two kids. He retired from the Army and sits on several non-profit boards. He’s on several social media channels and you can find him on Twitter @tomhandy1 and Instagram @tomhandy1.

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.