In a world full of financial insecurities, individuals are beginning to look at retirement funding at a younger age. While it is important to have fun and enjoy life, it is wise to also begin planning early. Here are five things that should be done before the age of thirty in order to create a more secure retirement future.
Start a 401(K) or IRA
Whether it is a company sponsored 401(k), a traditional IRA, or Roth IRA, it is important to start creating the retirement nest egg early. Most financial experts suggest 15% of the gross income; however, if you are struggling financially start small. Even putting away 2% will grow with time. If an employer is willing to match part of the contribution try to put away a minimum of that much. This is a great way to take advantage of “free money.”
Stocks and Mutual Funds
There is a hot debate over stocks and bonds versus mutual funds. Which has a history of performing better with a higher return? A good mutual fund will create a 10-15% gain on average. Stocks and bonds are fantastic if used correctly; however, there is a lot more volatility with stocks and bonds. In either scenario, it is possible to lose much of what is invested if not done properly. Before dropping an entire retirement fund in one place, be sure to get some solid investing advice. Getting good advice will keep from potentially losing a lot of hard earned money.
Get a CD
A CD, or certificate of deposit, is one of the least risky investments you can find. If you want to be safer with your funds, this can be a good choice. A CD pays interest on money much like a normal savings account; however, it is generally a higher interest rate of return. The reason banks pay out more for a CD is that it comes with the agreement that you will leave your money in the bank for a longer period of time. This is beneficial to the bank, whereas a normal savings account can ebb and flow with cash as you deposit and withdraw funds. This is a good idea for those looking for longer term investments and returns at a later date.
Pay Off Debts
The flip side to the staying out of debt coin is to pay off what is owed as quickly as possible. This is one of the smartest investments any younger person should really consider. This will save hundreds if not thousands of dollars in the long term; this is assuming a few thousand dollars is carried over monthly on a credit card. The average APR on a standard consumer credit card is around twenty percent. That could be quite detrimental to your future if you do not consider dealing with it sooner rather than later.
New Business Ventures
If there is a good business opportunity or other investment idea, calculate the risks and everything that could possibly go wrong. This helps to ease the excitement of the deal. The deal may be a great idea and worth every bit of risk; however, it is important to remain realistic. Calculating the risks helps prevent losing everything on one deal.