Planning for Retirement Is Too Confusing. Should I Even Try?
Yes you should begin planning for retirement. It can be intimidating to sit down and try to figure out how much money you will need to retire. Additionally, you may be intimidated at the estimated amount that you will need to save to retire comfortably. It is important to start now, because the sooner you start, the easier the sacrifices will be to make.
If you are completely confused, consider visiting a financial planner for at least one session. The financial planner can sit down and go over your finances with you. She can help you to project how much money you will need to retire, and ways to find that money in your budget. She may give suggestions on what types of products you should be using to reach your goals. Some financial planners may sell products, and some do not. Before you purchase or invest in a product, you need to understand what the risks and return on the product are.
Once you have figured out how much money you need to retire, you may want to break it down into smaller goals. You may set a goal to be saving fifteen percent of your income towards retirement by age thirty or you may choose to use dollar amounts as a goal. It is important to realize that there will come a point when your money is earning more than you are contributing to it. Your savings will really begin to grow then.
You may want to start by simply contributing to an ARS. This is a simple way to start investing, and as someone in your twenties the majority of your plan should be invested in aggressive funds or stocks. These are slightly riskier, but will give you a higher yield. As you grow closer to retirement, you may want to change the way you invest to lower risk investments. You can change the way your ARS is balanced at any time. However, you should eventually begin to save in addition to your ARS with other options. This may come after you have purchased your first home and paid off your debt.
If the thought of using investment tools is intimidating to you, you should find a financial planner who will explain your options to you. Additionally, mutual funds spread the risk by having investments in several different stocks and companies. You may want to find a few good mutual funds to invest in, and simplify things that way, as well. You can research the mutual funds and review the companies you invest in by looking at their portfolio. When you are considering a mutual fund, compare the administration fees, the average rate of return and the history of the mutual fund. You want to choose a mutual fund that has been open at least five years with a steady positive rate of return.