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Think Retirement When Young

Most young adults do not think about retirement too much. This is definitely the case with young teenagers as well. However, it does not change the fact that we all will grow older and that retirement day will fast approach. It stands to reason that we are never too young to start planning for retirement and part of that plan is to start saving money and getting a good return on the investment of what is saved.

Just think about it. If a young person starts saving at age 18 and retires at age 65, then that is 47 years of steady saving. If a person were to save a dollar a day then that in and of itself would be $17,000+ dollars without even the consideration of interest. If a person is to save $1 a day for 47 years at a 5% return and a 3.1% inflation rate, that savings would grow to around $70,000. Thus, you cannot start too young. In fact the younger you start saving for your retirement, the better.

Initially, you might want to invest your money into some investment vehicles that provide high rates of return. These of course will be the riskier investments, as they tend to return higher rates. When you are young, it is advisable to do this because you can bounce back from market downturns with plenty of time to recover. As you get older and closer to retirement, you want to protect what you have accumulated and keep the investments in less-risky vehicles. Of course, you won’t achieve the high rates of return that you would in the risky ones but the idea here is to protect yourself from taking losses close to retirement. Also, make sure that all of your retirement investments are tax-deferred in that you do not want taxes to negatively impact you while you are building your retirement fund.

Other Resources: 

Channel Title: Retirement advice and news - CNNMoney.com

  • How Uncle Sam wants to boost your retirement
    Usually I cringe when our leaders in Washington try to help improve our finances. I'm afraid their efforts may do more harm than good. But two new ideas being discussed inside the Beltway could actually make it easier to prepare for retirement. Both center on the income you'll generate from your 401(k).
  • 43% say they have less than $10k for retirement
    The percentage of American workers with virtually no retirement savings grew for the third straight year, according to a survey released Tuesday.
  • Retire early, save for a home
    Like many households, Wener and Tieun Vieux have suffered a few financial jolts of late.
  • The retired couple's guide to livin' the dream
    Question: My husband and I have been happily married for 28 years. Careful spending and sound planning over time has provided us with a very comfortable financial future. Although we're compatible in many ways, our outlook differs when it comes to enjoying our money. I'm more of a saver and I hate to shop. I'm already retired, and when my husband retires in a year we'll begin drawing on our retirement savings. Can you suggest some tips on how we can communicate effectively about spending our money? How do we assure that we'll both have the independence to decide how we want to spend "our share" without judgment? --Margaret M.
  • Make the best of a bad 401(k)
    You're probably feeling a lot better about your 401(k) these days, and not without reason. The average balance for experienced workers, after declining 19% in 2008, bounced back 29% last year, including new contributions.
  • Retired early, coming up short
    Question: I lost about 40% of my retirement savings after taking early retirement. I'm now 55 and have $650,000 left. Can you suggest a portfolio that provides capital appreciation, income and growth? I require about $6,000 a month to live on. --Bill, Philadelphia, Pennsylvania
  • 401(k) flub: Turning down free money
    Question: I'm 24 and my 401(k) plan matches $1.25 for every dollar I contribute up to 6% of salary. I currently contribute 3% of my salary and then put $75 a month into a Roth IRA. I do that because I don't want all my eggs in one basket. I'm wondering, though, whether I should stop the IRA contributions and take advantage of the company match instead? What do you think? --Matthew, Sacramento, Calif.
  • What you need in retirement: friends
    My wife is always chiding me that I spend too much time working and not enough keeping up with friends. "You'll be sorry when you retire and don't have anyone to do things with besides me," she warns. I hate to say it, but she's right. It's easy to assume retirement planning is all about the bucks, but nonfinancial issues matter too.
  • How much to contribute to a 401(k)
    Question: I'm 42 years old. What percentage of my weekly paycheck should I contribute to my 401(k)? --Gary, Bronx, New York
  • Protect yourself from a double-dip recession
    Question: We're in our late 60s, retired and have a comfortable amount of money in retirement accounts, mostly mutual funds. My husband wants to liquidate most of our holdings and put the proceeds in money market funds, laddered CDs, maybe an annuity, as he fears the political situation will lead to another recession. Is he right? --Sharon, Kennewick, Washington
  • The price of procrastination: $455,000
    Question: I'm 34 and have yet to begin saving for retirement. I'm considering participating in my company's 401(k) plan, but I'm unsure whether to do so since my employer doesn't match my contribution. What do you advise? --Nikia, New York, New York
  • Making $300,000 last a lifetime
    Question: My mother-in-law, who's in her early 60s, was recently widowed. She now has Social Security and approximately $300,000 from a life insurance policy to live on. She's not comfortable taking on much, if any, risk but she does need to generate income from the life insurance proceeds. Any recommendations for how she should invest this money? --Chris, Atlanta, Georgia
  • Invest $900k in a variable annuity?
    Question: I'm 62 and have accumulated about $2.6 million in retirement savings, which is invested in stocks and bonds. My adviser suggests that I take a third of this money and invest it in a guaranteed 6% income variable annuity. The cost of the 6% rider is 0.95% of the account balance per year. Do you think this is a good idea? --J.H., Lansing, Michigan
  • 4 smart fixes for your 401(k)
    With stocks up more than 60% since hitting bottom last March, the red ink is finally fading on the typical 401(k) account. Yes, it's safe to look at your statement again: Balances for boomers who have worked 10 to 20 years at the same company are now down less than 3% on average, compared with pre-crash levels; younger employees and 45- to 64-year-olds with less tenure are solidly back in the black.
  • A retirement plan for the laid off
    Question: I'm 57 and I think there's a good chance I'll be laid off this year. If that happens, I'll have to move my 401(k) balance to an IRA. On the recommendation of a finance professional, many of my former co-workers have transferred their 401(k) savings into annuities. Do you think this is the way to go? -- E.Z., Deer Park, N.Y.
  • Writing off losses in your portfolio
    Question: If I sell a mutual fund to write off the loss on my tax return, do I face any restrictions on reinvesting the money? -- Tom M., St. Paul, Minn.
  • Ready, set, convert to a Roth
    You've probably heard that the restriction barring those earning more than $100,000 from converting a traditional IRA to a Roth will soon be history. This means that as of January, anyone with an IRA can create tax-free income in retirement.
  • Living it up in retirement
    There's retirement living, and then there's living it up in retirement. The latter is part of the draw of one of the fastest-growing retirement options - the continuing-care retirement community. These CCRCs, as they're called, often look a lot more like four-star resorts than old folks' homes.
  • Retire without taxes
  • 3 easy ways to start saving now
    Question: I'm 22 and want to get an early start on saving and investing for retirement, but I don't know where to begin. How do I start a retirement plan? --Jacklyne S., Kileen, Texas
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