If you want to live comfortably in retirement, you should be investing now. The earlier you can start, the more likelihood there is that you will be able to reap the rewards and enjoy them in good time. But how do you make the right investments that will get you there? Follow these top tips to make the right choices.
Work on your superannuation
Superannuation is a really great place to start your investments, and thankfully in Australia, retirement plans are mandatory. It’s your employer’s responsibility to put away part of your salary every month. When you retire, the money is there waiting for you. If your business has a superannuation plan, make sure the terms are favourable compared to other funds. Do your research.
Work out what to hold back
Before making investments in the stock market, think about the money you are going to need in the next 5 to 10 years. If you have children, this could include college fees, car payments, and helping them to get a deposit on their first home. Include your living expenses in your calculations too, if they are not always covered by your current wage.
When you have settled on a figure for these considerations, this is the amount of money you should be holding back. Do not include it in your stock investments – it’s too risky. If you don’t actually have enough money in the bank to reach this figure, then you aren’t ready to invest.
Use your age
One of the smartest things that you can do is to make sure that your stocks are going down as you get older, so that you have more cash and less investments. This makes it certain that you will have cash on hand when you get to the age that you will need it.
A good way to calculate how much should be on the market is to take your age away from 100. This shows you what percentage of your spare cash should be invested, and which percentage should be in bonds or cash. If you are 30, you can invest 70%. At 50, you should only invest 50%. And at 65, you will only have 35% in stocks. Of course, you can sell and get out of the stock market whenever you feel that the time is right.
If nothing else, you should certainly be checking websites like Market Matters for tips and advice on how to treat your investments. You may wish to push ahead alone without an advisor, and that’s fine. But you still need help now and then. Even an expert will consult with others to be sure that they are on the right track. This will help to make sure that you always make the right investments and sell at the right time, and that you aren’t watching your whole nest egg disappear because you didn’t ask for help.
Keep fees low
Finally, try to make sure that you keep your investment fees as low as possible. Those fees are money spent and gone, not saved or invested. Any fee that you pay is more money taken directly out of your pocket. The key to long-term profit is to minimise the amount that you spend along the way.
With these tips, you can set yourself up for a comfortable retirement at a good age. There’s nothing like preparing ahead of time to make things work smoothly!