When, Where, and How to Begin Investing for Retirement

You already know that you should be putting funds aside for a rainy day or emergency savings in the event you should lose your job or experience a personal emergency (we recommend having enough savings to cover at least two to three months of expenses so you can cover your mortgage and car payments, etc.). But have you thought about how you will finance those sunny “golden years” down the road?

Investing for retirement may not be on your radar, but the truth is, it’s equally important to begin planning for your future retirement. If you think it’s too early, or if you feel you’re not yet ready financially, think again. Even with debt from car payments, student loans, and living expenses, there are many ways that you can invest money (and time) wisely for your future goals.

It’s true that some people begin investing later in life and still manage to enjoy comfortable returns on their investments. However, you may have friends experiencing financial troubles and know that things don’t always work out that way. Investing earlier in life can sometimes make the difference between retiring when you are ready and retiring when you are able. And while you will hopefully be very healthy well into your senior years, that’s not always guaranteed.

Retirement planning is easier than it used to be, thanks to the many tools and resources available. Here are some basic steps to get you started:

401(k)s and Roth IRAs – Both Options Make Great Sense (for opposite reasons)

Many employers offer 401(k) plans, which are retirement savings accounts, and you may even be fortunate enough to have a job where your company offers matching contributions to the plan. 401(k) plans are versatile and, since the contributions are generally not taxed until disbursement, your take home pay may not seem quite so diminished.

Another investment which can go a long way is the Roth Individual Retirement Account (IRA). The key differences are that the money you save is taxed before it’s deposited into the Roth IRA, and the funds can be enjoyed tax-free upon retirement. Another feature of Roth IRAs is flexibility: you have the option to withdraw the money you have deposited (though not the earnings) without penalties, making the Roth IRA a potential source of emergency funds. Click here to learn more about this year’s maximum contributions to your traditional or Roth IRAe.

Time (and Compounding) Provide a Powerful Force.

Perhaps the greatest advantage to investing at an early age is the effect that compound interest can have on your savings. A long-disputed quote has Albert Einstein claiming that compound interest, “is the most powerful force in the universe.” Regardless of who said it first, there is some truth to the joke.

What makes compound interest special? It is interest based not only on the principal, but from previously accrued interest. In the short term, it’s not terribly impressive, but over thirty years or more, it can truly pay off!

Great minds have been fascinated with compound interest for generations. Founding Father Benjamin Franklin, who often said that a penny saved was a penny earned, put his philosophy to the test upon his death in 1790. At that time, he bequeathed $1000.00 each to the cities of Boston and Philadelphia, with intent to build trade schools and public works projects in one-hundred years’ time. Compound interest did the trick, netting $572,000 for those cities in 1891. The fund was closed in 1990, with the institutes named for the statesman and scientist, earning a $7 million-dollar bounty.1

Another Powerful Force – Your Advia Financial Advisor team

Your Advia Financial Advisor team is located at Advia Credit Union to help provide guidance on your many retirement planning, investment options and insurance needs … throughout your lifetime. Whether you’re just beginning your employment years or considering the next exciting phase in your life, we’re here for you – providing real advantages for real people.

Excerpts from this this blog were prepared by MarketingLibrary.Net Inc. (Investing at an early age – the benefits of advance retirement planning), and do not necessarily represent the views of the presenting party, nor their affiliates. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or a recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any investment.

Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.

1 – http://www.laphamsquarterly.org/essays/trust-issues.php?page=all [5/31/12]

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