Sunday, January 8, 2012

Retirement Planning Tips for New Grads

The great day has arrived. You’ve finally graduated from college, and now hold a degree. Could things get any better than this? Well, yes. It’s called the rest of your life. Now that you have the degree, it’s time to go to work. It’s also time to start planning for your retirement. You may think a thing like that can be put off for awhile, but there’s no time like the present to begin. Following are a few retirement planning tips for new grads.

Start Now

If you begin saving money for your retirement while you’re in your 20s you’ll be able to build a substantial fund by the time you reach retirement age. However, if you put it off until you’re in your 40s or 50s, the amount of money you’ll have to live on after retiring won’t be nearly as much. Start saving for retirement as soon as you get your first paycheck, and you’ll be able to enjoy your Golden Years much more. Now is also the best time to connect with a financial planner who can help you formulate a savings plan.

Simple Savings Account

Although the return isn’t spectacular, a simple savings account may be the best way to start planning for your retirement. The fundamental act of setting aside a few dollars each week and putting it into a savings account can become a psychological tool to help you begin saving in earnest. By training yourself to stick a few bucks every week into a savings account, you’ll be laying the groundwork for a lifetime habit of devoting a portion of your paycheck toward your retirement. A savings account won’t earn much interest, but it can provide the impetus to branch out into other areas that will build your retirement fund quicker.

Create a Budget

To insure that you’ll have a few bucks left over to invest in your retirement, it would be a good idea to create a budget as soon as you have a paying job. Figure out all your expenses and deduct them from your income, then take as large a portion of what’s left over as you can and devote it to a retirement plan. The sooner you start, the faster your retirement fund will grow, and the larger it’ll become. If there’s not much money left after paying your bills it would still be a good idea to put a few dollars into a retirement fund rather than blow it on frills. You’ll be glad you did when it comes time to retire.

Start Slow and Stay Safe

In the beginning, your investments should be kept to instruments that don’t carry much risk, such as an IRA (Individual Retirement Account.) If your employer offers a 401k, take advantage of it. The tax benefits alone are worthwhile. If you start your retirement fund slowly, and stay with safe investments your retirement fund is bound to grow. The more you add to it, the larger it’ll become.

Stocks, Bonds and Mutual Funds

Traditionally buying stocks, bonds, and mutual funds has helped a great many people expand their retirement accounts. However, the stock market is extremely unpredictable, and you could end up losing everything if you’re not careful. One way to make sure you don’t lose all your investment capital at once is to diversify your investments. Instead of taking advantage of that ‘hot’ tip you overheard at the water cooler; you’d be better of checking into it before laying any money down. Even if it seems like a good investment you shouldn’t spend everything you have and invest it on any one stock. If the bottom drops out of that stock all your savings could go with it.

Spread Your Retirement Investments Around

Your retirement fund is too valuable to risk on any one venture. Instead, you should spread your retirement investments around. Buy a few stocks and bonds here and there if you believe in them, and put a little into a mutual fund, which are a bit safer investment--but have a fall-back plan--hang onto some of your cash so if the investment tanks you won’t lose it all. If you put a little money into stocks and bonds and some more into mutual funds, you will have a good start on a retirement fund. Add to that the savings from your IRA and 401k and you should have a healthy nest egg when it comes time to retire--providing you manage it correctly, and don’t dip into it unless you absolutely need it.

By Pat Singer: Pat writes about accredited online colleges for

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