6 Steps to Successful Retirement Investing


30 June,2014

If you want to build a nest egg that will result in a successful retirement, you need to have a good investing plan. The reality is that you are unlikely to reach your retirement goals if you don’t invest. As scary as that sounds, the truth is that investing is one of the best ways for “regular” folks to build wealth over time.

As you prepare to create a retirement plan, here are 6 steps that can help you increase your chances of success:

  1. Figure Out Your Retirement Needs

    The U.S. Department of Labor reports that fewer than half of Americans have taken the time to calculate how much they need to save for retirement. Your first step in a successful retirement plan is to figure out how much you need. Look at the lifestyle you want to live in retirement, and estimate what it will take to make it happen. And consider that you could live for 30 or 40 years in retirement, thanks to increased longevity.

  2. Determine What to Set Aside Each Month to Reach Your Goals

    Your next step is to determine how much money you need to set aside every month if you want to reach your retirement goals. Your best bet is to use a retirement calculator that can help you play with the numbers. It’s best to estimate on the low end of returns, though. Instead of assuming you’ll see a 10 percent annualized return, like many gurus still tout, you are better off assuming that your annualized return will be six or seven percent. It’s better to err on the side of caution.

  3. Figure Out How to Set That Money Aside

    Next, you need to figure out how you will set that money aside. If you need $450 per month to reach your retirement goal, you need to have a plan for coming up with that money each month. Consistency is key when you are investing for the long term, so it makes sense to put together a plan for getting the money you need. You can do this by cutting out some of your expenses, or by earning more money. Start a side business to raise more money that you can invest for retirement.

  4. Open a Retirement Account

    Now that you have money to invest for retirement, it’s time to open a retirement account. If your employer offers a plan, go through that channel. Find out if you can get an employer match for the money that you contribute to your plan. You’ll get a tax benefit, and if there is an employer match, you’ll get free money as well. This is a great way to build your nest egg.

    However, if you don’t have a retirement plan at work, or if it is just awful, you can also open an IRA. Anyone with earned income can open an IRA and invest. In many cases, this means that you have more options and lower fees. Note, too, that there are options for self-employed entrepreneurs. The SEP IRA and the Solo 401(k) are both great options.

    Use a tax-advantaged retirement account to better save fort he future.

  5. Focus on Index Funds and ETFs for Your Retirement Investing

    Rather than relying on stock picking (and the hope that your picks will pan out), invest in index funds and ETFs. There are a number of low-cost index funds and ETFs that can allow you to diversify without the need for stock picking. Instead, you get access to general market performance. When the entire market does well (and it has let to lose over a 25-year period), your portfolio does well.

  6. Stick to Your Plan

    Finally, stick to your plan. Once you have determined what you need to do, and created a plan to make it happen, you need to stick to it. Don’t raid your retirement account for any reason, and continue to invest over time. It’s vital that you stick to your plan so that you avoid future pitfalls, and so that you don’t end up losing out at the last minute.

With the right approach, there is no reason that you can’t build a credible nest egg. Retirement investing can help ensure that you outlive your money, no matter how long you live.