Many people plan to depend solely upon their social security checks to get them by in their golden years, but the cold, hard fact of the matter is that social security is not enough. In today?s economy, where housing prices and rental rates have risen at phenomenal rates, the $800 per month that social security pays is barely enough to cover housing costs in most cases, much less insurance premiums and food.
For this reason, it is important that everyone develop a financial plan, and your financial plan should start with investing. Investing will help ensure a steady source of income long into retirement, making your life much easier and more enjoyable. The following are brief descriptions for beginning investors to help familiarize themselves with the many different kinds of investment options available:
401K Plans are the most common type of investment, and one in which almost every worker has. The reason for this is they are the easiest investment because they require very little attention on the part of the workers who have them. They are so easy that workers don?t even have to worry about contributing to them, for their employer does it for them. In fact, most workers with 401K Plans never even notice the deduction from their paycheck.
Stocks are a common type of investment amongst the population who makes more that $125,000 annually; however, it is growing more common to see more middle class households invest thanks to the availability of online investing and lower fees companies offer. Investing in stock is a wise option and provides great returns for your money. If you decide to use this option you may want to strongly consider hiring a broker to guide you in the decision making process; however, if you are part of the middle class just starting out and can?t afford a broker, you will want to make sure and conduct thorough research before investing. There are many helpful websites that offer great advice.
Real Estate is one of the most lucrative investment options available, and thanks to lax lending standards almost everyone can invest in real estate with little or no money out of pocket. Buying real estate and renting it to tenants is a great way to ensure long term income streams for you long into retirement. People will always need a place to live and property is the one thing that can?t be created or grown. In fact, before considering the many options listed you may want to strongly consider investing in real estate.
Bonds are a safe way to ensure that at the very least, when the term of the bond is up and you cash it in, you will walk away with your initial investment. A bond is a promissory note from the government or a private company, in which you loan them a certain amount of money, and in return, they agree to pay you back with interests in a set amount of time.
Mutual funds usually reward the broker in charge of them better than the investor, but they are still an investment option that is available, and one which requires less risk on the part of the investor. What essentially occurs when investing in mutual funds is that a broker manages your money and invests it in a list of various stocks so that your money is diversified and the risk of you losing it all quickly is lessoned.
Money Market Funds
Money market funds are a safe short-term investment option. This kind of investment makes you an independent shareholder in the company in which you invest and requires you to pay only $1 per share. In addition, these investments often come with check writing privileges, allowing you to use the money whenever you need or want to.
Annuities offer you the chance of developing tax-deferred income. Annuities are an agreement between you and an insurer, in which your investment protects your earning potential should you run into job problems down the bumpy road that is life.
Brokered Certificates of Deposit (CDs)
Of all the investment options available, CDs offer the lowest return for your money. However, the upside is that you can use the money at any time without paying penalties, even though you agreed to deposit the money for a set amount of time. Life is unpredictable, so this is a nice option to have.
Do not let yourself become one of the 80% of the population that retires poor and struggling.
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