Go Big Investing In the New Year
Go Big Investing in the New Year
A common and admirable New Year’s resolution is to save more money. Many of us go about our new savings by chipping away at our wasteful habits, but instead of sacrificing that one latte a week, I want to encourage our new savers to think big.
Instead of putting a few dollars here and there into a savings account and earning virtually no interest, why not take a step back and make an investment something bigger – like your retirement. We hate to think about retirement, (we’re young, right?) and most of us get a sense of security because we are adding money to our 401(k) or 403(b) and hopefully getting some match from our employer, but the hard truth is that this is not likely going to be enough to get you through retirement. Most retirement professionals will tell you that because of the decline in pension plans and the increase in job mobility our generation is going to be much more dependent on our personal savings than those that came before us.
What that likely means is opening up an Individual Retirement Account (IRA) to supplement your retirement savings. Opening an IRA can be confusing, with multiple varieties (traditional vs. Roth) to choose from, and it is only complicated by the vast array of institutions trying to lure in assets. To make things worse, once your assets are in the door, many institutions shift their focus to selling their investment products, which may not be in your best interest.
So taking the feeling that you are being sold a product rather than provided a service, and coupling that with the a confusing-enough-already marketplace is enough to make most investors balk at opening an IRA, or at least postpone it until next year. Don’t fall into that trap. If you haven’t already opened an IRA, now is probably the best time to do so. The tax advantages of an IRA simply compound over time, so the sooner you start the better. If you are thinking about opening a traditional IRA to get a tax break, it’s not too late to have that break added onto your 2011 taxes. As far as the IRS is concerned, 2011 lasts until you file your 2011 taxes. That means most of us have until April to make our 2011 contribution.
If you are a bit intimidated, don’t be. Talk to people you know about where they put their money, and when you meet with a banker or broker to open your IRA, know that since you have the assets, you have the power. If you feel like you are being sold something, you likely are. Do not be afraid to shop around until you sit down with someone you have confidence in. There is also something to be said for going it alone. Low cost online brokerages make it very simple to open an IRA, and most are very friendly about guiding you through the process. Once your account is open, remember, you have complete control over your investments, and with a little education, this can be very empowering.
At some point you likely want to sit down with a financial professional to make sure you are on the right track, but just because you are not ready for that meeting today does not mean you can’t take matters into your own hands and get started saving for your retirement.
Guest Blogger:
Robert B. Drach
Drach Market Research Advisors, LLC
rbdrach@gmail.com
(850) 270-6289
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