Retirement is a funny thing. We plan our whole lives for something that seems so far away it will never arrive. We are told to start planning early so that we can enjoy the benefits of compounded growth, yet in our "early" years we are repaying loans, mortgages, getting started in our careers (meaning we do not have a whole bunch of disposable income to begin with) and so on. Indeed, in our youth we rarely consider the consequences of an under-funded retirement plan.
Most people begin some kind of retirement investing program in their mid-life stage. This means steeper contributions, bigger sacrifices for the whole family and, most unfortunately, less time to regularly monitor how our investments are doing.
Most people begin some kind of retirement investing program in their mid-life stage. This means steeper contributions, bigger sacrifices for the whole family and, most unfortunately, less time to regularly monitor how our investments are doing.
These are but a few of the strange realities that relate to our careers in retirement investing. Of course there are many others like whether to invest in a traditional IRA or a Roth IRA, whether we should convert, how much and so on and so forth.
Fortunately, there are two simple things that investors can do to ensure that their retirement investing program stays on track to a successful goal. Those two things are:
1. Invest automatically and periodically. These are on and the same. By investing on a regular monthly basis, investors not only make it easier on themselves in budgetary terms, but they are no longer worried about market timing (which nearly all of us get wrong anyway). Investing on a regular basis ensure that investors get the best of both worlds and, in fact, during periods of market increases (such as the long term trend we have experienced since the beginning of time) our dollar cost averaging efforts turn out to be closer to proper market timing anyway.
2. Establish your asset mix up front and stick to it. By understanding what your asset allocation model should be, you will be able to stick to that plan throughout your retirement investing career. This is important because one of the most basic fundamentals to profitable investing: sticking to a plan instead of chasing the latest and greatest "hot" trend. By chasing trends, investors end up buying in too late and selling a little too late as well. This not only cuts into profitability, but distracts from the investments that would yield real long-term profits.
Where many investors err in this area is in being honest in how they feel about risk and re-evaluating their tolerance and time constraints on a regular basis. While all financial planners and advisors will provide this type of analysis, investors are urged to consider such things independently so that they are completely satisfied with the shape their investments will take as they ease toward that seemingly distant milestone known as retirement.
