Investing Doesn’t Have to be Hard
When you first saw the title of this post, did you first think “yeah, right”. I have some good news for you. Successful retirement investing doesn’t have to be hard and it doesn’t have to take up a lot of your time either. And in today’s financial services marketplace, you can do it inexpensively.
I wanted to write this post after reading an article in Marketwatch titled “Millennials and Generation X: This is why you’re having such a hard time saving for retirement”, published March 16, 2020. Here is how the article began:
“The 40-year-old data scientist, and mother of two, in an apologetic tone, says “I just can’t think about it now. I know I should, but I just can’t right now.”
A lawyer, 53, and father of a college age son, voices a similar response — “No! I just don’t have the bandwidth.”
Are these two people, one millennial and one a member of Generation X, responding to a telemarketing sales call with a ‘great deal?’ No, they are simply responding to a question exploring how they are thinking about retirement and if they were actively saving and planning right now.”
Mr. GenX and Ms. Millennial are making a huge assumption. It’s that investing for retirement will be a time consuming and difficult endeavor. This is simply not true. You simply need to establish your goals, a strategy, and an automatic system for making it happen. And waiting to start is never a desirable choice.
So first establish a goal. It could be something as simple as I want to retire comfortably at age 65 and continue to have about the same “living income” as I have now. Or, I want to retire at age 55 and travel the world. This establishes how much your retirement will cost.
Second, your strategy should be to determine how much you should invest each year and how you should be investing those funds to eventually pay for your cost of retirement. This decision is based on how much you’ve already saved, your current age, how much risk you can handle, how much other guaranteed income you may have at retirement, and, of course, your goals. An example of a strategy will be something along the lines of “I will invest 10% of my pay, I will increase this amount over time as my pay increases, and I will divide my investments into 10% cash, 10% bonds and 80% stocks. And I will do this every month until retirement.” Having a strategy may be the most important part of retirement investing and will vary for each individual situation. The best part is that executing your strategy is totally in your control. The results, though, are not. You’ll need to review and update your strategy every few years. Software or a financial advisor (like me) can help you here.
Lastly, to make investing easy and painless, set up an automatic system to make it happen. Your employer sponsored retirement plan (such as a 401(k) or 403(b)) is a great start if you have one. Choose your investments, your contribution amount, and let it do the work for you every paycheck. If you need to fund IRA’s (because you do not have a plan at work or want to fund IRAs in addition to your plan), you can set up an account at a low-cost brokerage and set up an automatic purchase every month. Low-cost brokerage options are numerous and include companies like Schwab, Fidelity and Vanguard to name a few. Once again, with this option, like a 401(k) or 403(b) you can set it and forget it.
If you are struggling with carving out time, your easiest option is your employer plan. In about 15 minutes or less, you can join the plan, set your beneficiaries, set your contribution level to as much as you can afford (try to do at least a total of 10% between your contribution and the employer match), and choose a target date fund that fits your age. A target date fund is available in most employer plans. If there is an employee match in your plan, always invest up to at least that amount. This approach isn’t based on goals or strategies, but it takes very little time and will get you moving in the right direction. When you have more time to commit, you can then fine tune this.
Once you get an automated system in place, let it do its thing. Review your progress, goals, and strategy at least once a year to make sure you’re on track. Make any adjustments as needed. So many of us are overwhelmed with time management and overloaded schedules. However, successfully investing for retirement can take a lot less time than people think.
Enjoy the Journey!