Why You Should
Start Saving for Retirement Now
Since the start of this century
stock market returns have been less than stellar. The S&P
500, which is a proxy for stock market performance declined
by 37% from 2000-2002. In addition, in 2006 it is only down
-.5% through June 23, 2006. That is discouraging consider
most stock market averages rose at least 20% annually between
1995 and 1999. But it is important to have a savings plan
and stick with it in good times and bad. Historically, the
capital markets (stocks, bonds, real estate and commodities)
rise more than they fall. Those who stay the course often
make money in the long run. You can miss out on opportunities
if you stop investing.
Here are more
reasons you should enter—or stay in—the game:
Your Net Worth
minus your liabilities equal your net worth. When you buy
stocks, bonds and real estate, you are investing in assets.
When they rise in value, your net worth goes up too. Investing
in capital markets can feel like a gamble, but historically
the stock market returns average 10% each year, so the odds
of making money over time are good.
offer retirement savings vehicles such as 401(k) or 403(b)
plans. These options allow you to save for retirement and
receive a tax deduction (contributions up to $15,000 for
2006 are tax deductible) In addition, many employers will
match a portion of your investment. So why pass up free
money? Even if you can only afford to put aside 1% of your
paycheck, it makes sense to get started. Over time, as you
receive raises you can designate a higher portion of your
income to increase your retirement savings.
of Investment Options
think the only option for investing is stocks, but there
are other vehicles available. There are bonds, for instance,
which represent loans to government or corporate entities.
Bonds typically pay investors interest twice a year. There
are also commodities and real estate, which should be included
in a retirement portfolio to protect against inflation.
Commodities include raw materials like oil, gold, grains
and meats. When inflation rises, our purchasing power is
reduced and this causes stocks and bonds to fall. But commodities
and real estate prices increase in these scenarios. Another
option for the busy investor who doesn’t have the
time to pick individual stocks or bond is mutual funds.
There are thousands to choose from.
of Starting Early
only needs to sock away $135 per month or $4.50 per day
to become a millionaire by 65. Waiting until age 40 requires
$892 per month or almost $30 per day to reach the same goal.
The earlier you start investing, the less money you need
to reach your goal. That’s why it’s important
to start now.
need a big investment to get going. Firms such as Sharebuilder.com
don’t even require a minimum balance to open an account.
You can start with whatever you can spare. If investing
scares you, hire a financial planner who can help you construct
a portfolio tailored to your needs. Ask family and friends
for referrals. Be sure to ask how the planner is compensated.
Some are paid commissions for selling their company’s
products even if they’re not the best fit for you.
also start an investment club. Get a group of friends or
family members and pool your money together to buy stocks
or mutual funds. It’s a fun way to invest. The National
Association of Investor Corporation (www.betterinvesting.org)
has all the information you need to get your investment
club in gear. The Internet also has resources (Yahoo Finance
- http://finance.yahoo.com/ and MSN Money - http://moneycentral.msn.com)
to help the every-day person learn more about investing.
With all of the resources available, you have every reason
to start investing today.