In today’s day and age, most people don’t even think about their retirement plan until they start working a full-time job. This usually includes a 401k or some other type of investment option where the employer may match contributions to the plan.
They usually fill out the forms conservatively, picking a balanced investment plan and never think about it again until they switch jobs, get laid off or get closer to retirement. Some even ask themselves if they could have done something different?
Investing Is Important
Money does nothing for your retirement if it just sits there in a saving account. You could put some in CD's, but that yields little to no money in interest. The goal is for your money to work for you when you are working and even after you retire.
Investing does several things for you:
• It adds to your retirement portfolio faster than by saving alone, increasing your net worth.
• Regularly contributing to an investment retirement account amounts to tax savings.
• It gets you involved in making decisions for your fund.
How to Choose Investments
There are a plethora of choices for retirement investments. Choices include stocks, bonds, mutual funds, treasury notes, real estate, precious metals and now, in this modern age, cryptocurrencies like Bitcoin or Ethereum.
Before you choose your investments, you need to choose how you will save. Under federal guidelines, some IRAs are not suited for investments in things like precious metals or cryptocurrency.
What most experts will tell you is to get a self-directed IRA. A self-directed IRA will allow you more breadth to include some alternative investments.
Those can include not only precious metals and cryptocurrency, but can also include real estate, private company stock, oil, gas, intellectual property and even horses.
There are two types of do-it-yourself IRAs.
• Self-directed IRA
• Self-managed IRA
Self-directed IRAs involves you hiring a custodian to manage your account on a daily basis according to your wishes. This is the option best suited if you are going to invest in things heavily regulated by the government.
For instance, there are federal rules about investing and storing precious metals. If you want to include precious metals in your portfolio, you need to seek out gold and silver IRA companies who meet government standards.
Self-managed IRAs allow you to choose your individual investments with only minimal guidance. These are found at online trading sites like E*Trade and big brokerages like Merrill Lynch.
There are some risks associated when opening a self-directed IRA. The primary risk is not understanding the tax rules and unwittingly violating them. For instance, your income must be passive. Investing in something that generates a dividend could get you in trouble.
Making Your Plan
Experts state investors who operate under a steady plan fare much better than those who succumb to financial trends. One aspect of planning is to provide allocations to a diversified portfolio.
This helps you in two ways since no investment does well all the time. The allocation between your varied assets will hedge you against unexpected loss. The other advantage of using this method is that it doesn't require constant monitoring or work to maintain it.
One point of discussion is whether to have an aggressive portfolio or a more conservative one. That depends on your age. Young people are guided to riskier investments. They can amount to big gains, but also a big loss.
As you age, you can no longer afford such risks because there just isn't enough time to make up losses. By the time you retire, you should have at least 60 percent of your investments in conservative investment choices.
The same principle should apply to creating allocations. Your stock investments are likely going to be more aggressive than other options. Precious metals and real estate are more conservative. They fluctuate but yield well over extended time with virtually no long-term risk.
While most hear about gold and silver through television advertising, there are more metals included in a precious metal portfolio. Palladium and platinum are also included in precious metal IRAs.
Both have increased in value over the past decade because emerging countries like India and China use metal in their industries and that has increased global demand.
Cryptocurrency has been rising quickly in the past year, but some say it's a bubble ready to burst. It is an aggressive investment with high risk.
Like precious metals, there are several types of cryptocurrency on the investment market. Bitcoin is the most recognized, but there are 35 different online currencies available including Ethereum, Litecoin, Namecoin, and Swiftcoin.
Balancing these various investments based on your age and risk assessment will ensure you are always doing well, even if certain markets drop.
The one piece of advice every investment expert offers is to research before you invest. Gaining knowledge on where you are putting your money will not only offer you better choices, but it will give you confidence about your retirement plan.
About the Author
David Warren is the senior writer and lead researcher at HardStacks. He has been a financial engineer for over 30 years and has been investing in alternative assets since the Great Recession of 2008. He has a true passion for learning about economic cycles and educating others on how to protect and grow their wealth by investing in precious metals, real estate, and cryptocurrencies. Follow him on Facebook.
Brian is a dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013 who, with his family, has successfully paid off over $100K worth of consumer debt. Now that Brian is debt-free, his mission is to help his three children prepare for their financial lives and educate others to achieved financial success. He blogs at Debt Discipline.