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INVESTMENT STRATEGIES FOR RETIREMENT Everyone wants his or her golden years to go smoothly. Most people will retire when they are 65, so that leaves approximately 20 years of the retired life. A person needs to have enough money to live comfortably without holding a job. Bills still need to be paid and the house still has repairs to be done. Not only do people want to live comfortably, they also want to travel and spend time doing things not normally possible during their careers.
Planning for retirement early in life is essential for financial comfort after the age of 65. Mr. and Mrs. Edwards are a married 25 -year-old couple looking to start their retirement fund.
They are coming to the investment agency, Finance 'R Us, to obtain information on retirement. They know that they want to retire at age 65 and want to continue to live comfortably in the middle class. They do not have a great deal of knowledge about retirement funds, so they would like to pursue the easiest and most convenient option. Purpose, Scope, Limitations, and Significance The purpose of this report is to recommend a portfolio that will best represent each of these investments for the Edward's retirement needs: 401 (k), stocks, mutual funds, savings accounts, and bonds. The analysis of these alternatives will include the interest rates and money to be gained as well as risks and other disadvantages. This information will give the Edwards confidence that they will have enough money to retire comfortably, but this information will be limited because there are only a few options covered and it was gathered in the past.
A constant change in the stock market makes it hard to guarantee the future success fulness of their investments. For this report, we will use a variety of sources. They will include books, interviews, Internet sites, and on-line magazine articles. We will consult these sources to determine the most common types of investment strategies for a retirement fund. The sources will provide us with background information along with advantages and disadvantages of the different investment strategies. There are some basic items that you will need to know before you would want to invest in a 401 (k) plan.
These items are: How long are you planning to invest for, what kind of a risk are you willing to take, what are the advantages of investing in a 401 (k) plan, and what are the drawbacks of a 401 (k) plan. There are many advantages in a 401 (k) plan. First of all your contribution to your account is taking out before the government takes out taxes (401). So that means that you are going to be taxed on a smaller amount of money. Since you don't pay taxes on any return you make on a 401 (k) investment, you " ll accumulate savings faster. Tax-deferred growth gives you the full benefit of compounding growth.
Every year the full amount of your investment will grow without interruption from the IRS. You also have access to professional management. Most of the money managers have MBA degrees or higher, and years of experience in the finical market. So you are getting professional help without even paying for it (Johnson). Length of investment. The longer that you can hold off onto your investment, the better off you " ll be.
The longer you leave the money in your account, you can reduce the risk and maximize the account. Since this is a retirement fund, there should be no problem in leaving the money in your account (401). Risks. It is not that you are really taking a risk that you are going to lose your investment.
It could be better described by saying the amount that your account is going to fluctuate over time. Risky investments fluctuate much more and rapidly then do safer investments. Depending on the return you are looking for you are, going to have to take some kind of a risk. "You are going to have to remember that your 401 (k) plan is a retirement fund. If you take your money out before you turn 59 1 / 2, you will face some stiff penalties. If you take a loan from your account, you have to pay taxes on the money you took out, plus you have to pay the current interest rate on your money, " (Johnson). If you have never invested before there are also added levels of risk.
It is important that you have some knowledge of what you are going to do before you invest. Many retirement funds include many different options to invest money. Playing the stock market is could be one option. A stock is a share of a company that the company decides to sell to raise money without creating debt. This means that any person with shares of a company owns part of the company. If that company has a good year and makes a profit, it can give out dividends to its stockholders.
A dividend is the money made in the past year divided among all the stock then given to the holder of the stock. "The right investment is a balance of three things: liquidity, safety, and return, " (internet). Or, how accessible money is, what the risks are, and what can be received from the investment. The stock market is a wild place, but if played correctly, it can be a profitable arena. High reward. The market can keep rewarding and rewarding with pay out after pay out. Most are over a long-term basis though.
Not many people can hit it big in a short time. A key to success is to diversify stock bought, don't buy all of one company. But don't put all of the money into one spectrum either. For example, don't buy all electronic companies, if the whole electronics spectrum crashes, then all is lost. Lots of options.
The stock market is a big place with many companies. Having many decisions to make before investing, the main decision to be made is what company to invest in. Before investing hard earned money, research the company and know what the company has done in the past. For the best opportunity to make money, diversify stock options.
Wall Street can be a scary place when you are not prepared. But even prepared for the worst, doesn't mean there won't be loss. The stock market is an unpredictable place and every investment made is a gamble with hard-earned money. Chance to lose. With every investment made, there is a chance to lose it all.
The stock market is unpredictable which makes it hard to invest wisely. No one can ensure total safety in any stock that is why the money invested has to be a surplus. Even stock that pays dividends can go down, which means the stockholder could lose money even if paid a dividend. Must pay fee. To trade on Wall Street, a stockbroker is needed to buy or sell stock. Stockbrokers charge fees based many different ways, depending on how much is traded, the price of the stock traded, or just a basic price for any trade.
The fees should be minimal, but it all depends on what happened in the market. An Individual Retirement Account (IRA) is a fairly new type of account that has been created for the sole purpose of providing benefits for people concerned about their retirement (Tiffany 27). Within the last year, the Roth IRA has been launched, and it provides an alternative to the traditional IRA. An IRA acts as a supplement to any investment a person may make (Bennie). In order to obtain an IRA, a person must fill out an IRA application when making the investment (One). Both the traditional and Roth IRA provide many advantages over simply investing one's money without also filling out an IRA application.
Tax benefits. The main reason to invest in IRAs is the tax benefits that they provide. Both the traditional and Roth IRAs provide tax-free growth on their accounts (Tiffany 27), so any investment that is also in an IRA will not be taxed if it makes any money throughout the year. The traditional IRA is also untaxed when it is first invested, so when filling out an income tax return, one can claim that income as being deposited into an IRA, and it will not be taxed (Tiffany 28). The Roth IRA is untaxed when a person withdrawals the money from an investment (Birnbaum 122). So, instead of having to claim that unearned income on a tax return, a person can claim that it was in a Roth IRA, and save money.
Investment opportunities. A person is not limited to a set number of investment opportunities as may be the case in other retirement-based accounts (Tiffany 28). Nearly every type of investment gives the option of putting the money in an IRA. Since IRAs are specifically for retirement, there are some disadvantages that make it specific to retirement. Withdrawal limits. A major disadvantage of IRAs is that once the money is in the account, one cannot retrieve it until they reach the age of 59. 5 (Tiffany 2...
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Research essay sample on Hard Earned Money 401 K Plan
