Investing For Retirement

The best way to grow your retirement savings is to invest them intelligently. Putting money in a bank deposit account will, after deduction of DIRT, more than likely not earn you enough to even cover inflation.  In order to beat inflation you have to invest in such a way that your rate of return goes above and beyond inflation. The best place to to use what are referred as “real assets”. In essence, this would historically have meant property and stock market equities.

The stock market based approach carries risks. So how can you maximise your earnings while minimising your risk?

Diversification is the first place to start in any investment portfolio, irrespective of whether retirement is the end goal or not. You don’t want all your eggs in one basket. There are countless investment opportunities from individual stocks and unit funds to commodities, property to cash deposits . In an ideal portfolio, all of these should be used. Generally, when one class of assets loses value another class goes up. If you’re well diversified you won’t lose all of your money if one group takes a dive. Unfortunately, however, there is a closer correlation between equities and bonds than most people care to mention and from time to time both move in the same direction at the same time.

If you’re not a professional investor, you probably don’t know how and where to invest your money. In that case, you should engage a financial planner or an investment adviser who does a lot of research into your personal circumstances before compiling an investment recommendation. If you are investing your own money, don’t fall into the trap of trying to profit from ups and downs, known as timing the market. This is a certain way for anyway to lose money over time.

Start And Keep Up A Pension Plan
Put the maximum amount possible each year into a pension arrangement whether it is a personal pension, occupational pension scheme or PRSA.
 
Time and Money
The longer you’re in the market, the better you’ll do. You should make a plan and start saving as early as you can, putting away as much as you can. You should either decide upon a fixed percentage of each months earnings to invest for retirement, or decide upon a maximum amount of money to spend. Using the maximum amount to spend approach is great for people who expect to earn more and more over time. It allows you to save a larger percentage of money as your earnings increase, rather than spending a larger amount.

In either case, make yourself a retirement goal, come up with a plan to accomplish that goal, and stick to it. You can use our free retirement calculator to find out how much you need to put aside each month to reach your goal.

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