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.
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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 up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
