If you are just setting up a 401k retirement savings plan or if you have had a plan for years, but are now actively preparing for retirement, you may have many questions. The common question being where should I invest my money? Of course, the decision is yours to make and you should speak with a qualified financial advisor, but continue reading on for some tips to help you get started.
When it comes to choosing your 401k investments, there are a number of important questions you need to ask yourself. You need to know how much money you need for retirement, how much money you have, when you anticipate to retire, and how much of a risk you are willing to take.
Your age should play a significant role in determining your investments. When do you want to retire and how old are you? If you are in your early 20s or 30s, you have a lot of freedom. You won’t retire for at least 30 more years. For at least 10 one those years, you can stand to take a risk. You can gamble on the stock market. Now is the best time because the economy is in a fair to poor condition and the stock market just made a major correction.
Stocks are expensive now, but if we have several more corrections, stocks will become available for cheap. Research companies to examine and compare their long-term averages. Stocks with high shares before the 2007 and 2008 years are likely good companies, they just fell victim to the poor economy and consumers limiting their spending.
As for why those young in age are able to take a gamble with stocks, it is because the market usually recuperates. As previously stated, it is in a state of flux right now. Most financial experts state it will drop again and then start to improve in less than 7 years. You invest money in low-cost stocks and watch them rise as the economy improves. With that rising, you will experience gains in your retirement savings.
If you are on the other side of the fence and in your late 40s, 50s or even your early 60s, you may be willing to take less risk. You plan to retire soon. If you have had a 401k plan for years and were invested in stocks, you likely lost money in 2008 and with the current stock market correction.
No one wants to lose money, especially so close to retirement. If you lost money and can, hold out. Remember the economy should start to improve in less than 7 years. If you can wait that long, the stocks you invested in should recover and continue to rise. You may not make a profit, but at least you are able to recuperate the money you lost.
The risk you are willing to take should also play a role in determining your 401k investments. Even if you are young and in your 20s or 30s, risks may not be your thing. You do not want to lose money in the event the market takes another swing after improving. This is okay and normal. In that case, diversification is your best option. Opt for a collection of stocks and bonds. You are able to take some risks, while keeping one foot planted firmly on the ground.
In the event the stock market takes another hit 20 years from now, you will not lose all of your retirement savings.
Finally, is important to consider the money you have and the money you need for retirement. Say you are 50 years old. OK, so you lost $50,000 due to poor stocks. Should you pull out now? Not necessarily, those stocks should start to improve before you reach the age of 60. Speak to a financial advisor. If they anticipate a market turnaround, keep your investments as is.
Wait until you recuperate some of your money and switch to low-risk investments. If not, you will need to find another way to come up with that missing $50,000, plus any other money you need to financially survive your golden years.
For or a FREE Consultation regarding retirement decisions, our list of recommended financial advisors, and some important tips, tricks and strategies that can make the difference between you retiring with freedom, or retiring broke. Contact us today or visit our webpage: http://blackandretired.com/free-consultation/
Make sure you check out our Facebook page: The retirement information source of wisdom, knowledge, resources and useful videos for retired and pre-retired black professionals.