Once you retire, you shouldn’t expect to be able to live on Social Security alone. Those benefits will replace about 40% of your pre-retirement wages if you’re an average earner, and most seniors need around twice that sum to live comfortably.
That’s why it’s so important to consistently fund an IRA or 401(k) plan. That way, you’ll have savings you can access to supplement your Social Security income.
Image source: Getty Images.
But the money in your IRA or 401(k) shouldn’t just sit in cash. It’s essential that you invest your money to grow it into a larger sum — and also, to allow it to keep growing even once you’re in retirement.
That said, you’ll need to be careful with how you invest your money for retirement. And you’ll specifically want to steer clear of these big mistakes.
1. Investing too conservatively
Over time, the value of money tends to erode due to inflation. Keeping your savings in cash at, say, a 1% or 2% average yearly return could mean struggling financially as a retiree. And while investing in bonds will likely give you a higher return than that, your nest egg might still fall short if you limit yourself to conservative investments.
A better bet? Go heavy on stocks when retirement is years away. While stocks tend to be volatile, they might offer returns that are two or three times higher — or more — than bonds, thereby allowing your savings to grow nicely.
2. Investing too aggressively when you’re on the cusp of retirement
It’s a good idea to load up on stocks when you still have much of your career ahead of you and you have time to ride out the market’s ups and downs. But if you’re within a year or two of retiring, stocks should not comprise the overwhelming majority of your portfolio.
If a stock market crash occurs a month or two before your retirement date and you’re heavily loaded on stocks, you might have to postpone that milestone or otherwise risk locking in losses in your portfolio. And that’s not a situation you want to land in.
3. Dumping your stocks completely as you leave the workforce
While it’s smart to shift toward safer investments right before and during retirement, that doesn’t mean you shouldn’t hang onto some stocks in your portfolio. Quite the contrary — you’ll want your IRA or 401(k) to continue generating growth even once you’re at the point where you’re taking steady withdrawals. And stocks will do a much better job of fueling that growth than bonds.
Your specific stock/bond split should depend on different factors, including your personal appetite for risk and the other income sources you have available to you during retirement. But generally, a 50/50 or 40/60 split is a solid bet.
Invest savvily for your dream retirement
The investment decisions you make leading up to retirement could dictate how much you enjoy — or despise — that period of life. Do your best to avoid the above mistakes so you can make the most of your senior years without financial worries.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
