Investment Tips to Fuel Your Retirement

This article seeks to provide basic but useful investing tips based on your financial age, with recommended savings percentages and strategies designed to help make your retirement wishes come true. Financial age in this article refers to how close you are to retirement, so that while most people under the “middle-aged” category may indeed be 40-60 years old, someone in her late twenties who plans to retire by age 35 should consider herself financially middle-aged for the purposes of retirement planning. The below advice is broken down into three categories: Financially Young, Financially Middle-Aged, and Approaching Retirement. However, regardless of the stage you’re at, you should read all three sections for a broader overview of what options are available.

Financially Young: If you’re just starting out in your retirement planning and you have at least 25 years ahead of you before you plan on cashing in your chips, congratulations–you’re financially young. While many Americans opt to save 4%-5% of their salary for retirement, you should actually save closer to 10%-15% if you want the best chance for living out an active retirement. Though compound interest will be on your side, retiring is more expensive than most people realize. Inflation, rising medical costs, reduced health insurance and sheer boredom can work together to clean out that retirement fund, so save a lot! The good news: because you’re so young, time is on your side. You can put the bulk of your savings into volatile investments such as the stock market without risk of destroying your future through a massive immediate loss of equity such as a stock-market crash. With many years to go, you can safely ride out dips in the market and even capitalize on them by buying in when stock prices are depressed.

Financially Middle-Aged: Fewer than 25 years before you’re planning to retire, but not quite in the 5-year spitting distance from it? If you’re financially middle-aged but getting a late start, you’re not alone and you’re not done for. While it’s true that you’ll need to be more aggressive in the amount you set aside for savings, you can still invest in the stock market with time working on your side. Shoot to save at least 15% of your annual pay to hit those retirement goals. But guess what? You’re probably earning a higher salary than ever before, so that 15% of your salary will go farther than it would have earlier in your career. Start saving now and don’t look back.

Approaching Retirement: So you’re less than a decade away from retirement and you still don’t have much saved up. You made some mistakes before, and maybe you counted too much on that pension and had it yanked out from under you. You’re right to take your situation seriously, but you’re not without hope. Start saving immediately, and save as much as you possibly can. Shoot for about 30% of your salary, and more if you can afford it. The benefits of saving a lot at this point are twofold: One, you’ll have more money later, and Two, you’ll be used to a reduced income because you’ll have been living frugally off of only a portion of your salary already. Put the money into low-risk investment options like government bonds, certificates of deposit, and a good old-fashioned savings account. Also realize that more and more Americans are choosing to work through retirement to continue feeling productive and to earn extra income.

Remember, the best time to get started is right now. Start saving immediately and you’ll be in the best position possible later on, when it’s time to start spending the money.