Retirees greet each other at a Saturday night dance in Sun City

Question to Millennials: retirement savings and why invest?

Many people today are concerned about saving for retirement. With so many issues in the economy, some investors feel hopeless.

It is difficult to project how much money is needed in retirement. The stock market is just now recovering the gains back from the last recession. If investors want to be financially successful, they need to start planning for the future.

One of the best ways to improve your odds of financial success is saving for pension plans through work. There are some companies that have stopped funding these investment plans. As workers continue to get older, these pension plans hurt the profits of the company. One of the negative aspects of saving for pension plans is that the plans are usually tied to the company. If the company goes out of business, the money is lost. Here are some pros and cons of saving through this investment vehicle.

Why you should invest

Investing is the best way to reach your financial goals over time. There are few people who want to stay in their current job for the rest of their life. Investing allows you to build wealth and leave the rat race to do whatever you want.

However, it is difficult to determine how to invest. There are so many investment options to choose from that it can be really confusing to many people. This often results in people just giving up on investing. This is the wrong approach to take. It is vital to conduct research in this area so you know how to reach your financial goals.

One of the reasons that work investment options are so popular is because they are easy to execute. Many times, you can just deduct money from your paycheck right into an investment account. Instead of having to worry about opening up a separate account and dealing with a financial advisor, workers are able to save for retirement without thinking about it.

Cons of using plans through work

There are several reasons to consider using an alternative investment account versus one through work. The stock market can be risky, and a reverse mortgage may be a better option. The biggest reason is the additional risk that you carry when you invest through work. If someone works for a company that goes out of business, their pension plan goes away with that bankruptcy. This is a major risk that many people do not account for. Some people wrongly assume that working for a large company mitigates this risk.

However, in the last recession, many workers found out the hard way that investing all of your money with one company in the stock market is dangerous. For examples, employees of Enron lost everything that they had accumulated with the company in terms of company stock and pension options. Instead of putting all of your eggs in one basket, it is important to spread around your investments.

A reverse mortgage is a great way to make monthly income. If you own a home, you could have the bank pay you for the equity in your home. Depending on the overall value of the home, you will be able to get monthly checks without doing anything. A reverse mortgage is a perfect option for people who are living on a fixed income and who do not have a job.

Some investment options through work also do not offer a great rate of return. The rate of return on your investments is one of the most important aspects of having success hitting your goals. If you want to earn more money, a high rate of return will help you reach your goals. With a limited scope of investments to choose from, it can be difficult to reach the desired rate of return with many company plans.

Next steps

The first step in reaching your financial goals is knowing what your goals actually are. Many people never take the time to plan out their lives. Once you know what you want, you can work backward and figure out how much money you need to be investing every month to reach those goals.

Although company investment plans can be a great way to reach your financial goals, there is an additional risk that the company could go out of business. There is nothing wrong with saving some money through a company investment plan. However, no one should invest all of their money with one company.

With inflation starting to increase again, investing has become more important than ever before. Now is the time to start investing to reach your future goals.

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