Investing for Retirement

If you are looking for a good return on your investment in stocks you ask yourself, what is the best investment for my money? This is a fair question but there is no single best answer. If you are investing for retirement as opposed to investing for shorter term gains you will take different approaches. In this article we look solely at investing for retirement. Start with a basic assessment of how much money you will need when you retire as opposed to how much money you will want. Given a long enough time frame you can populate your investment portfolio with conservative stocks that reliably give a good yearly return on investment. Such an approach can help you add a nice nest egg to your home, your 401 K, and social security payments. If you have put off investing for retirement until mid life or later you will need to consider taking more risk with your investments or making due with less in your golden years.

First Things First

How old are you? When do you want to retire? As a practical matter when will you be able to retire? Where would you like to live? Will your home be paid for by then? Would you like to travel? Will you have excessive medical bills? A wise man once said that there was not problem that could not be solved in a quiet room with paper and pencil. This was obviously said before computers! However, the point is well taken. Spend some time considering what your life will really be like when you quit working, what you will need, what you will want to do with any spare cash, and so forth. Then start thinking about how much you need to put away every pay period, month, or year in order reach your goals. Also remember that in investing for retirement you do not want to live a life of poverty and denial along the way. When investing for retirement be sure to make reasonable contributions to your retirement funds. The very first part of learning how to invest is to pay off credit cards first and buy your home. The home mortgage interest deduction is still one of the best deals going.

The Miracle of Compounded Returns

The best means of investing for retirement is to start early and keep adding to savings over the years. A good rule of thumb is to divide the number 72 by your yearly after tax return on an investment. This gives you the number of years it will take to double your money. Earnings on investments compound when reinvested or left in place. After a few years, your earnings on investments such as dividend stocks which will provide a quarterly dividend check along with, hopefully, stock price appreciation can come a point at which your annual return equals what you invest each year from your normal income. If your goal is to invest for retirement a list of good stocks would be nice to have. But, when it comes to stocks what is a good investment or stock today and will it remain a good investment tomorrow? Pick your stocks carefully, dump the ones that do not pay, and start as early as you can when investing for retirement.

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