What can i do to save for retirement! PLEASE SERIOUS ANSWERS?
Answers:
Life insurance is never a way to save for retirement. Life insurance's only purpose is to provide income to your family in case you die. If you ever wanted to use the cash value, you have to borrow it and pay a loan interest on it. If you cancel the policy, you will pay surrender charges on it. If you die someday, your beneficiary only gets the death benefit and all the cash value in the policy is used to pay a portion of the death benefit and the insurance company will make up the difference.
If you want to save for retirement, you should open a Roth IRA and I would work with an investment adviser who can evaluate your short term and long term risk so that he/she can find the suitable investments for you. Majority of companies will either have you pay a fee for advise or you need to put in a large deposit to avoid the advise fee.
By your age, you are more likely to invest in aggressive growth mutual funds. Then again, I don't know your risk tolerance to market fluctuations. Some say you should pick no load funds because there's no sales charge. No load funds has no one managing the funds. There is no one there to research and finding out what companies it should invest in. They will give you listing of hundreds of no-load funds and you pick which one you want. So they have low expense fees.
For me, I need human interaction and someone to help me find suitable investments for me. Picking random mutual funds is like doing surgery on yourself. If you have no experience, you could bleed to death or get lucky and fix yourself up. In this case, if you randomly pick mutual funds, you either have bad mutual funds or good mutual funds. If you want investment advise and someone to manage the fund, you would pick load funds. Always buy Class A shares because they have low annual expenses of 1% or below. Class B shares are ripoffs since they have annual expenses of around 2%.
I open a Roth IRA when I was 23 years old and I have 3 mutual funds from Legg Mason Partners. I have the LMP Aggressive Growth Fund, LMP Appreciation Fund, and the LMP Fundamental Value Fund. These mutual funds are for someone who is willing to take on high risks to get large returns. Young adults should be investing aggressively. Currently these three funds have an average rate of return of 15% in the past year. In the past 10 years, they have an average rate of return of 10.26%. The managers have an average investment experience of 28 years.
I don't know how much you are able to save each month. If you replace your current life insurance policy with a 30 year term, you will save yourself some money each month and you will have more money to invest. Depending on where you open your Roth IRA, you may be required to make an initial deposit of $1000 or more to open an account. I open mine at Primerica and they only require a $25/month investment per mutual fund, which is good because on some months, price per share may be high, so I get only few shares. But on other months, price per share may be low, so I get more shares. If I average this out, the cost per share I own will be low. What I just described is known as "Dollar Cost Averaging." I don't invest $25/month, I invest $100/month.
open a money market account that will have automatic deposits (an amount you designate) into the account from your paychecks, that way you never see the money and are tempted to spend it. it keeps you disciplined. and some accounts won't let you even take money out unless it's a minimum of like $200 so it keeps you from going into the account & just spending money. it really helps you save!
If you have $35 dollars a month put it in the highest interest savings account you can find. When you have a grand or so, start looking for stocks that pay steady consistent dividends. Reinvest the dividends and as your income grows put more money in your investing fund. Learn to invest in stocks for growth, stocks for dividends, real estate and businesses.
Traditional IRA or Roth IRA. Google it to learn all about it, then call a financial adviser in your area.
First, if a 401K is available at your employment, sign up and contribute the max that they will match. If your comment about no pension means no 401K, then open your own IRA. I'm in favor of a traditional IRA as you start with more money upfront, but the Roth has benefits as well. $35 a month at your age will continue to grow if you always put half your raises in the account. Life Insurance isn't nearly as good an investment as a good IRA. Reason is because a whole life policy is two products mixed together--an extremely conservative investment product and a life insurance policy. I'd go for a private account that is a pure investment and at your age, you can afford to be quite aggressive in the account mix you select.
You can set up a pre-tax or post-tax mutual fund. There are also some whole life insurance policies that you can get into for around $35. It is OK to start small and as you earn more you can increase your contribution amount. It is good to se a younger person that is thinking about this. Good Luck!
You might be surprised, you should check the life insurance out. But really the best thing to do, is to pay off debt. Once you pay off debt you'll have more to save. You are definitely better off putting that money into money market, IRA or Roth IRA then just leaving it in the back in a savings account. If you can't afford these types of plans, which sometimes require a minimum amount to begin...then you might try Certificate of Deposits. Many of them are offered. they have different time limits and different interest. basically the longer you put it in the better the interest. however just like other retirment plans if you need to take it out early then there is a penalty. but you could start this way, once it expires put the whole amount plust the interest in the cD again. Once you build up enough maybe you can put it into a IRA or money market but you should understand how the money can grow or not grow by reading all the material. oh there are also bonds and you could try looking into that. the stock market is good if you're knowledgeable.
You don't always make money buying stock. same with money market and IRA the reason being is sometimes stock fluctuate up and down. if it goes down then your stocks will be less that what you bought it for. As well you are taxed on proceeds in all cases if you're making money. You should try to read up on that as well. Its read up on all the options.
good luck
Check out your alumni association if they have group insurance as a benefit. That is how I got my life insurance, 500K for under $20/month. However, a life insurance is not the same as retirement money. You might be thinking of IRA or pension plan.
But for retirement, you can open an IRA account. You can start with 100/month - it may seem a lot right now, but you will get more back from your tax return.
Good for you!! So few people today consider saving...
You are right, life insurance is not the way to go for savings. It takes years and years for the cash value to grow to anything.
A lot of banks now offer what the call a "goal savings" account. What this does is transfer a minimum of $25 dollars a month from your checking account into a savings account.
Granted, that is only $300 a year but it all adds up. If you want, you can open an IRA with that money after a year, and add the $300 or more every year toward your retirement.
And of course, by adding it to your IRA every year, you can take that $300 off your income taxes and save even more money by paying less taxes. There is no minimum for Ira contributions.
I toss all my change in a jar, and cash it in when the jar gets full. Even if you spend all the quarters for laundry and such, the pennies, nickles and dimes will add up to over $100 for a 3 pound coffee can. Then that money goes for retirement.
If your state has a deposit on pop cans, use that money when you redeem them to toss in the change jar. If you walk around the neighborhood for exercise, take a small plastic sack and fill it up with the cans by the road, every nickle adds up.
You can also save money by shopping wisely. Think twice before buying name brand foods and clothes. Look for the generic or store brand equals. Cut your cable tv (if you have it) to the basic or cut if off completely. That can save you well over $20 a month.
If you have a cell phone, do you really need it? Or would a cheaper plan or pay as you talk phone work better. Maybe if you have a cell phone you can cut the home phone. Maybe dial up instead of high speed for internet? My internet is $5 a month for juno dial up. Compared to $30 a month for high speed, I save over $300 a year.
Rent movies from the library instead of the video store. My library charges $1 for a rental, the blockbuster charges $4.
Eating out costs a fortune, as well as buying lunch at work.
Try eating at home and taking your lunch to work. Even taking your soda to work can save big money over the vending machines.
Many everyday expenses can be cut without giving up your quality of life. Try it for a couple of weeks and see how much you can save.
Good luck
whatever you decide to do, do it tax deferred, i.e. IRA, it is pretax so will not pay taxes on the money until you withdraw it at retirement age. ROTH IRA is post tax and you never pay taxes on the capital gains, but you still have to wait to retirement age. Many companies have DRP's, dividend reinvestment plans, which allow cash investments free of comissions as well as dividend reinvestment. A mutual fund that tracks the S&P 500 index is also a good option, while it doesn't beat the market, neither do 80% of the thousands of professionally managed funds out there. Good luck, save early and consistently and remember the goal, and that is to not run out of money before you run out of time.
Life insurance is a ROTTEN return on your money. It's not intended to be an investment.
The BEST thing, if you've got $50 a month, is open up a Schwab account. Automatically have the $50 a month deducted either from your paycheck or your bank account - that way you're SURE that you're paying yourself first.
As your income goes up, don't forget to adjust how much you're saving. If you set it up in a traditional IRA, every dollar you put in now, lowers your federal taxes. Personally, I have NO FAITH that congress isn't going to tax Roth IRA's, so I don't recommend them.
You can pick low risk mutual funds from the Schwab website, and you have LOTS of time to let your money grow.
I'd also suggest listening to the Mutual Fund Show, www.mutualfundshow.com and you can learn a lot about investing in mutual funds there. You can listen to archived shows over the internet, and get fund recommendations there.
Remember, the primary purpose of LIFE INSURANCE is to give a payout to your survivors if you kick off earlier than anticipated. The primary goal of INVESTING is to build up cash for your retirement. They are different goals, and they are best served with different products.
Definitely set your contributions up to be automatic so that it is easy to budget around.
Life insurance really only makes sense on the investment side if you are in a high tax bracket and then it should be questioned, not pushed. I'm guessing by having $35 a month, you are not in an especially high tax bracket.
As you can tell by the flurry of responses, there are people out there who want you business. Find one of them who will also listen to you instead of throwing out random advice.
Good luck and congratulations on starting.
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