It’s never too early to start saving for your retirement. The earlier you start, the less you have to take out of your weekly paycheck; and the more you will have when you are older. But, where should you begin?
Employer-Sponsored 401K Accounts
Just about every company offers a 401K account these days. This is an excellent way to save for your retirement years. By having a certain amount deducted from your weekly paycheck, you are not tempted to spend that money on anything else. Plus, if your company matches contributions, you an save even faster.
Stocks, or equities as they are otherwise known, are a way to buy into ownership of a specific company. The number of shares you own, compared to the number of shares available determines how much equity you have in the company. Owning just a few shares won’t get you much (if any) say in how the day-to-day operations are handled, but it will enable you to make a bit of a profit should share prices soar. Stocks are usually best handled as a long term investment, and can actually be quite risky when purchased as a short-term investment.
Basically an IOU from a company or government (which can be local, state or federal), bonds have always been a relatively safe way to invest. Issued as a way for government’s officials and corporations to raise money quickly for large-scale projects or expansions, they come with a guarantee that the purchaser will get back their initial investment, with a set amount of interest at a specific date. Although they generally do not allow the purchaser to make the same fantastic gains as stocks do, they do offer a safe way to make some decent profits over a long period of time.
Becoming more a more popular, mutual funds are a way to expand or diversify your investment portfolio, thus making the most profit for the least amount of risk, by pooling your money with other investors in order to purchase higher yield stocks, bonds and cash equivalents. The rationale with this type of investment is that if one fund does poorly, another will negate the loss.
Certificates of Deposit (CD’s)
Certificates of Deposit are very safe, allowing investors to make a set amount of interest (usually higher than a standard savings account), for a relatively short period of investment time (usually several months to several years), and minimum deposits of $500 to $2,000. Insured by the FDIC for up to $100,000, there is virtually no risk in this type of investment, although there are high penalties for early withdrawal.