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Investing for retirement
Choose the best retirement investments
- What are my retirement investment options?
- What are tax-advantaged accounts?
- What are taxable accounts?
- How do I invest wisely for retirement?
- See active retirement planning in action
- Consider enrolling in a target date
When it comes to retirement investing, a meaningful and well-informed strategy for wealth building is much more important than a six-figure income.
The retirement you desire is within your reach. By identifying your retirement goals first and foremost, you (and your fund manager) can break down the best strategies and tactics to reach your retirement plan via achievable, actionable steps.
Those first steps, of course, start with research. Look into the retirement investments best suited to your circumstances. Which investment products suit your needs and desired outcomes most? Which closely match your appetite for risk? What’s more, have you considered your appetite for risk?
Seek advice and ask lots of questions from key advisors and peers at this stage. Make sure you understand how the decisions you make now will impact your long-term retirement plans and any inheritance planning.
What are my retirement investment options?
There are lots of different tax-advantaged and taxable accounts to choose from when planning for your retirement. Some you can access directly from your salary, like employer-sponsored retirement plans and pension funds. Alternatives or supplementary options may require a broker or fund manager to help you understand which options are the best fit for you.
If like many employees, you’re unsure of your company’s sponsored plans or 401(k) offerings, it’s important to investigate these options now. These can often be the best investments for retirement, and offer safety and convenience too. If you are eligible, consider signing up and actively contributing to your employer’s plan. This is a great opportunity to make your money work for you, over time to meet your desired income in retirement and achieve your wealth goals.
If you aren’t eligible for employer-sponsored savings program, there are lots of other routes to planning for retirement available to you. Talk to investment professionals and seek out a financial services review. You may want to make use of reputable online resources like investor.gov, which offers a range of useful online tools and resources to help you plan for a bright future. For example, take advantage of the background checker tool to carry out due diligence on the investment professionals you engage with or simply use the online investor education tools to help steer your retirement investing strategy.
Exploring these resources in-depth, investigating your employer-sponsored options and seeking third party advice from an investment professional allows you to make informed decisions about your plans for retirement. Now you’re ready to make strategic decisions about the different types of retirement investments that will help you achieve best results.
Understanding the differences between tax advantaged accounts and taxable accounts will help drive those decisions. Next, let’s dive some of the key features and benefits of each of these investment options.
What are tax-advantaged accounts?
Tax-advantaged accounts can help investors maximize retirement income, by making use of the different types of tax advantages available. There are various different ways to access tax advantages. For example, you could make use of tax-deferred accounts, such 401(k)s and Individual Retirement Accounts (IRAs).
These types of accounts are portfolios that oversee your investments, but aren’t not in fact investments themselves. IRAs and 401(k)s don’t incur tax on annual earnings accruals, meaning income tax need only be paid on the funds withdrawn once you’ve retired. Other examples of tax-advantaged investments include municipal bonds, unit investment trusts (UITs) and annuities.
What are taxable accounts?
Conversely, there are no tax breaks or gains with taxable accounts. What you sacrifice in tax benefits, however, you can gain in other benefits. For example, brokerage accounts offer more flexibility and reduced restrictions that many tax-advantaged options. Some benefits include being able to access your funds whenever you want, for any purpose, without incurring tax or any financial penalties.
Taxable accounts can be accessed as a private retail investor or via a brokerage and you can invest in different asset classes like stocks, bonds and mutual funds. Remember, you’ll be liable for taxes annually on any income generated from your investments.
With an understanding of the different investment options and an outline of your desired income results, you’ll be closer to making informed decisions about how to save and invest best to meet each goal. In order to achieve these goals, you should understand the three main asset classes that you can invest in.
How do I invest wisely for retirement?
There’s no one size fits all approach to investing wisely for retirement. Each individual’s income goals and desired lifestyle in their retirement years is different. What’s fundamental however, is keeping your savings safe and financially protected, making use of financial strategies that will allow them to grow faster than inflation and to make use of tax-advantages. Beyond this, your retirement investments should work in ways that suit your appetite for risk while meeting the financial goals you desire.
Nuveen has a range of tools that can help investors and financial professionals work together to bring the retirement strategy to life and compare and analyze a group of funds. Financial professionals are encouraged to visit our retirement thinking page to get additional retirement investing insights.
What is the best retirement plan?
The most important consideration when planning your retirement, is that there is no substitute for saving. It’s the foundations on which you’ll build and grow your retirement fund. Furthermore, when retirement planning, setting smart goals and formalizing your strategy for achieving those goals is the best way to ensure you do.
Holding on to your why will also ensure you can visualize the bigger picture of what saving and investing now will provide you in the long-term. Write down your goals, being specific about the lifestyle you seek in retirement and how much you’ll need to achieve it.
Understand your time horizon
The earlier you start building your retirement portfolio, the bolder you can be with your appetite towards and attitude to risk. In your early working life, leverage your assets into riskier investments that are able to withstand long-term market volatility. Stocks and shares for example, whilst considered riskier investments in the short term, tend to outperform other types of asset classes over longer periods.
Understand your time horizon from starting to save, building and growing to your retirement age will help you strategize the best approach, identify which assets types will help you achieve your goals and formalize a route getting there.
Determine retirement spending needs
What does the life you want to live in retirement look like? You need to understand that to know what cumulative funds you’ll need to achieve it. Do you want to travel six months of the year? Or live in your mortgage-free home whilst looking after the grandkids? Something in between? Have you factored in healthcare?
Understand how diversification can help minimize risk
You’ve heard it a million times, but what does diversification really mean? Well, it all has to do with managing risk. Maximize your returns by devising an investment strategy that distributes funds tactically across different asset classes. This is the single most important strategy for maximizing returns when your portfolio is exposed to different market forces. It’s a strategy supported by investment professionals and one of the important tactics to produce long-range returns.
Just like any other investment opportunity, there will be a level of risk associated with any retirement goals. Risk, however, can be minimized throughout your career by rebalancing and adjusting your investments over time to reflect your retirement goals.
When you invest diversely, you protect yourself by allocating investments across various categories. When you diversify, you’re avoiding placing all your eggs in one basket, which allows you to feel secure even when handling market volatility.
Start investing early
When you’re planning for retirement, there’s often other priorities to consider, so the earlier you start preparing and saving for the future, the better. For those with families, developing a college funding strategy is an important part of life savings planning. Start too late and building the college fund can divert attention and hinder wealth accumulation within the retirement fund.
Starting your plan early can help you avoid this situation entirely. A long-term plan will help calculate all the factors needed in order to help you safely withdraw income from your portfolio. Even though spending money is easier than saving money, once you’re retired you will be grateful. The earlier you start saving will lead you to a greater chance of turning those investments into income.
Discuss your strategy and approach with your financial professional and consider where best to allocate funds at what time.
The first step however, is making simple saving behaviors a priority, including the best practice outlined below.
Make saving a habit
When you start saving early on in your career, it sets you up for making it a lifelong habit. Which help improve the chances of you reaching retirement with the ability to live comfortably. Utilizing advantages such as dollar cost averaging can go a long way in growing your income.
Create an emergency fund
No one can predict the future, not even financial professionals. That’s why creating an emergency fund to fall back on when difficult times strike, is immensely important. Having an emergency fund can keep you on the right track regarding your financial future.
Take advantage of compounded interest
Make your money work for you by utilizing compound interest early. Compound interest is when you earn interest on your interest. Meaning, the more you start saving, the more likely it is your money will grow over time. Make your money work for you.
Wanting to see active retirement planning in action? Take a look at Jonathan!
What does successful financial planning mean to you?
Successful financial planning is freedom; it gives you the ability to have choices. I want to one day open my own business, and I also want to be a homeowner, but before I do that, I’m looking to pay off my student loans. With successful financial planning, I’ll be able to accomplish anything I put my mind to.
How are you realizing your financial goals?
My two current financial goals right now would be to pay off student loan debt, as well as to open my own business. I save [at least] 25% of my check every month, and try to live off of $200 a month by choice. Some of my friends are like, ‘I can’t believe it…what are you doing’. But, at 25 years old, you have to get it together now, because if you wait any longer, it could become a really bad habit.
Consider enrolling in a target date (aka lifecycle fund)
Enrolling in a target date fund is one of the smartest decisions you can make when you are retirement planning. These types of Nuveen funds are also referred to as Lifecycle funds. Lifecycle investing is one of the easiest ways to invest for retirement. In fact, the funds gradually shift from more aggressive in your working years to more conservative as you near retirement. A target date fund will allow you to “set it and forget it,” an appealing prospect for a passive investor wanting to automate the pathway to retirement.