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Retirement saving - save young, save smart

Jun 22, 2017

By Bryce Kelly, Mt. Pleasant News

 

When is a good time to start investing in my retirement? It’s a question likely very few ask in their 20s and 30s. And while it’s unusual, financial experts say the younger you begin to invest, the higher the reward.

According to CNN Money, should the average 25 year old start setting aside $1,000 a year in a retirement account earning seven percent a year and stop investing completely when they turn 35, their total investment will have grown to roughly $113,000 by the time they turn 65 and are ready to retire. The earlier a person starts investing, the more they can benefit from compounding. That’s why it’s good to get going as soon as possible.

“It’s never too early to start saving,” says Jordan Sathoff, financial advisor for Pilot Grove Savings Bank. “In terms of what you should invest in, the answer to that is different for everybody.”

There are three main kinds of investments for retirement funds, including stocks, bonds and cash. Most financial advisors recommend retirement accounts should likely contain a mix of at least stocks and bonds.

One can also invest in stocks and bonds in one of two ways. One way is to buy them individually or buy them via a mutual fund. A mutual fund is a collection of stocks, bonds cash, or sometimes a combination of all three.

“The best way to begin is to ask yourself how much retirement money you will need to do the things you want and to provide for the things you need,” said Sathoff. “Some people do feel slightly out of their element when it comes to setting aside money for retirement and investing it. It’s questions like that where a financial advisor would come in handy.”

In addition to helping you decide how much retirement money to invest is right for you, a financial advisor will also be able to help with asset allocation changes as you move from one stage of life to another. As a rule, certain investment combos carry more risk than others. In addition, most investors’ tolerance for risk decreases as they get older.

Stocks are generally more volatile. For younger investors, the long-term growth potential of stocks usually outweighs the risks, according to CNN Money. When you’re older, this may not be the case. Bonds, on the other hand, are essentially interest-bearing loans that provide a company or government and give investors weaker long-term returns than stocks do, but less volatility.

Overall, Sathoff says finding a financial advisor with experience in guiding people through the process of retirement investing is always a good place to start in your retirement saving - no matter how young you are or how much you have to invest. In particular, Sathoff says finding organizations like Pilot Grove Savings Bank who are customer-focused is key.

Finally, in regard to checking on retirement investments, Sathoff says checking your investments doesn’t usually need to be done more than twice a year. According to him, investment checking allows investors to make sure their asset allocations still makes sense for their age.

“So much financial planning and investing can be done online now, which is something that many people can always look into,” says Sathoff. “Overall, the basic principles of saving young and paying down debt as soon as you can is key. When it comes time for you to invest in retirement, find a place that is professional, client-focused and listens to your needs.”

 

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