Young adults, starting a new life and looking to safeguard their future, might not be blamed for not investing right away. The choices in front of them are many, and can be bewildering at first glance. In addition, for many the idea of saving for your retirement when you are in your twenties and the world lays out before you is a tough one to encourage.
But now is the best time to start those habits of putting a bit aside every month to give you a nest egg to invest for the future. The question is, what is the best option for investment? Putting your money into some new engineering firm that develops the latest and greatest in a high pressure shaft seal design may not be the answer, but there are ways to invest in new technology without the risk. Here are the best options.
Of course, the point of starting at such a young age is that you have more time to set aside for your retirement, and so you should be able to do it with a small amount each month. One of the easiest ways is to set up an automatic deposit into your designated savings account each month out of your paycheck. If you can, ask your human resources department to take out the maximum you can each month for your IRA.
If the company you work for offers a 401(k), especially if they do any kind of matching contribution, you should take advantage of it. It is considered a better investment to use a Roth IRA when you are contributing at a young age as it will mean the money is a tax free investment, an important feature right now when your earning potential is higher then when you retire.
Investing in a Home
Of course, after your actual retirement savings accounts, real estate is the best investment you can make. Even in a market that is tight, as some cities such as Los Angeles or New York can be, finding a starter to get you into the market now is your best next move. The general advice is to always buy just a bit more house then you think you need, as you will grow into it.
This might sound a lot like when you buy clothes for little kids, and it is! The big difference is that this purchase will accumulate value as time goes by, instead of heading to the rag bag after a few years. Rule of thumb for rent versus buying is that if you don’t plan on staying in the same city for more than five years, it is probably cheaper to rent then to spend the money on that investment. But if you plan on staying put, then finding the cash for that first down payment is worth the sacrifice in the long run.
Safer Investments – U.S. Savings Bonds
When I was a kid, my dad would give us a savings bond as a birthday present each year. By the time I was old enough to start college, I had a nice little nest egg that had matured for basic needs and had begun a habit that would last a lifetime. While these bonds may not be much, they are a great way to set a bit aside and have a safe guaranteed payoff at the end.
You would be surprised how much these can add up, especially if you take them and reinvest them when they mature. This is a great way to set some money aside for that retirement that you know will be there when you are facing that big shift in life.