Are you wrecking your investing by making any of these choices?
1. Not investing at all
A recent survey by Deloitte Center for Financial Services found that nearly 60% of pre-retirees don’t have a retirement plan, and 20% expect to live on their Social Security benefits alone in retirement. The average monthly benefit from Social Security is only $1,230, so it’s clear that any savings are better than no savings. No matter how far behind you think you are, make a plan and start investing now for a better retirement.
2. Waiting too long to start investing
When it comes to investing, you can’t make up for lost time. That’s why you should invest early, no matter how small the amount, to take advantage of compound interest. For example, a $2,000 lump sum invested when you’re 30 years old can grow to $72,000 by the time you’re 60. But that same $2,000 investment will be worth $237,000 if you invest it 10 years sooner. That’s triple the money just by starting earlier! That’s the power of compound interest.
3. Not investing enough
While saving for retirement is a main goal for most people, they want to split their disposable cash between paying off their home, saving for a child’s college fund, and retirement savings. Multitasking with your money is fine, as long as you invest enough of your income for retirement. Why? A paid-for home won’t help you cover all your expenses in retirement. Neither will paid-for college tuition. Focus on retirement investing first, then you can tackle your other financial goals.
4. Taking cash or a loan against your investments
Roth IRAs and 401(k)s allow you to withdraw or borrow funds under certain circumstances. But doing so will not only lower your balance, you’ll also miss out on that money’s growth potential. Additionally, you could also be subject to taxes and penalties. Pay off your debt and build an emergency fund before you start investing, and use that cushion to pay for unexpected expenses. Keep your retirement fund for retirement only!
5. Investing with out understanding
Many investors believe they will save money by handling their retirement investing on their own. But do-it-yourself investors rarely have the time or the expertise to find the best funds or understand the market cycles that are part of stock market investing. As a result, they are more likely to reduce their returns by investing when prices are high and cashing out when prices fall.
Author and National Radio Host Dave Ramsey recommends you work with an experienced investing professional you can trust to help you choose funds and keep your plan on track. His investing Endorsed Local Providers (ELPs) agree with his investing philosophy and are ready to help you with your long-term retirement plan.
Source: Adapted from Dave Ramsey’s Investing Minute
For more about the series, Surviving My Finances go to www.RidgeFellowship.com
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