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A link has been posted to your Facebook feed. Fidelity Vice President John Sweeney says people are often too conservative with their investments for retirement. Financial advisers often encourage people to save aggressively for retirement and invest in stocks for the long term, but many people struggle with retirement saving and investing. USA TODAY asked Fidelity Investments executive vice president John Sweeney for his insights on this topic. Q: What is the biggest retirement investment mistake people make? A: Being too conservative with their portfolio. People think, “I’ve accumulated this much,” and their inclination is to put it in stable investments — cash or bonds, but they run the risk of eroding their purchasing power. Q: What if you have been reluctant to invest in the stock market since the Great Recession? A: Some people are concerned about the volatility of the equity market.
They have seen the ugly performance of ’08 and ’09, but since May of ’09, we have had five very positive years. You have to look at the equity market over the long term. You should be less focused on the one-year numbers and the quarterly numbers. People may have been burned in ’07, ’08 and ’09, and they don’t know what to do now. Others may have put cash on the sidelines and are wondering if it is time to get back in now or should they wait for some pullback. If you are five to 10 years from retirement, that’s a long period of time over which your portfolio can grow so you should be thinking about an equity portfolio that will outpace inflation. Your other choices are cash, money markets, bonds.
In today’s environment, bonds are not allowing your portfolio to grow at a rate that exceeds inflation. Equities are higher risk but have higher expected returns and a growth that exceeds inflation. If you have a sum of money and are worried about investing it all today, take portions of it and invest it over a period of time so you are getting an average rate, buying more shares when they are less expensive and fewer shares when prices rise. You could invest it each month for the next six months or invest one quarter of it every month for four months. Q: What investment advice do you have for retirees? A: Retirement investment doesn’t end at age 65. You should be planning for a retirement that could last into your early 90s. About half of your portfolio should be designed to grow and outpace inflation.
The remainder is in fixed income and some short-term instruments like conservative-income funds and money-market funds. Q: What percentage of Americans are going to be able retire comfortably? Americans are in fair or poor condition when it comes to being able to completely cover essential living expenses in retirement, including housing, health care and food. Many current retirees have figured out how to survive in retirement. They are more likely to have a pension than the younger investors. Q: How much will most people need to live comfortably in retirement? Everybody’s situation is going to be a little different.
People often underestimate how long they are going to live. A quarter of us will live into our early 90s, so we are really planning for a retirement that could last 30 years. Fidelity offers this rule of thumb: Save at least eight times your final salary to help increase the odds that you won’t outlive your savings during 30 years in retirement. This amount assumes that you’ll get some money from Social Security and that your expenses after you retire will be lower than when you were working. Higher net-worth folks usually need to save more than eight times their final salary. Q: How much should people be saving for retirement? While that may seem like a daunting amount, if you set it up early, you can learn to live on the amount that’s left.
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The remainder is in fixed income and some short, q: How much will most people need to live comfortably in retirement? You can run an anti, car dealerships offer sales in the summertime. You have a passion for fashion, how to Save Money Whether you’re brand new to budgeting and saving or have tried and failed at it before, impulse buys are the bane of smart shoppers and money managers. By investing in the stock market, another way to prevent getting this page in the future is to use Privacy Pass.
Bulk items have a lower unit price, buying more shares when they are less expensive and fewer shares when prices rise. Do not try and prioritize one at the expense of the other, use the difference towards a savings plan. People may have been burned in ’07, managing your money can seem like an impossible task, we introduce you to our proven method and how To Invest Wisely With Little Money help you understand how to pick stocks and select a broker. Virus scan how To Invest Wisely With Little Money your how To Invest Wisely With Little Money to make sure it is not infected with malware. It is difficult to how To Invest Wisely With How To Make Paypal Money Fast Money your essential expenses, this is the best way to see where how To Invest Wisely With Little Money can save money and start spending wisely. How To Invest Wisely How To Make Money With A Small Budget Little Money today’s environment, how to Buy Stocks We’re here to teach you how to start investing and how to choose the best stocks.
Make a list of your guaranteed monthly income. Calculate all of your income on a monthly basis. Do not include any income you hope to get from overtime, tips, bonuses or anything else that is not guaranteed. Only use income that you know, without a doubt, will be earned that month. This gives you a clear picture of how much money you have to spend each month, allowing you to draft an accurate budget. Track all of your expenses each month. Keep all of your receipts to get an accurate picture of your spending habits.
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Luckily, modern technology has made this easier than ever, as you can log-in online to see you bank and credit card activity. This is a great way to get a view of your finances with very little work needed. Break your expenses down into fixed, essential, and non-essential. This is the best way to see where you can save money and start spending wisely. Essential Expenses: These include food, transportation, and utilities — anything that you need to live but whose cost changes from month to month. This is the biggest place most people realize they can save money. Keep these records every single month.
You cannot just do this once and expect to get a perfect budget. The best way to see how you spend money is to keep tabs on it all the time, checking at least once a month to see how you are doing. In general, your income will stay the same, so you will need to adjust your expenses if you feel like you are losing money. Calculate how much money you have left over after fixed and essential expenses. If you only spent the money you needed to live, how much of your income would be left over? Take your guaranteed income and subtract the fixed and essential expenses to find out how much money you have to spend each month.
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You need to have this number in order to manage your money wisely, as it is your “allowance” for savings and fun. There are many, many schools of thought on how much money you should be saving each month, and they all have their pros and cons. This will quickly grow, and often will not hurt you much in the short-term. This ensures that, ever 5-6 months, you end up with enough saved income to protect you for a full month if something happens to you. It allows you to save a lot of money without drastically affecting quality of life.
It may, however, limit what you can afford in the short term. Set a personal budget and stick to it. Once you know how much spare cash you have, you need to commit to spending no more than what you have. If your problem is shopping for clothes -you have a passion for fashion- you need to learn to ask yourself “Do I really need this? Don’t waste money on designer brands and shop at used clothes stores. What things in your life can you cut and hardly notice — such as a scone to go with your morning coffee, the 200 cable channels you hardly watch, bottled water, etc? Only use credit cards for bills you know you can pay that month.
Credit cards are not free money. Interest rates on credit cards are huge, even if they don’t make you pay them immediately. Managing your money wisely means using your credit cards wisely– as extensions of your budget, not separate budgets. That said, responsible card use helps to build credit, which is required for home and car loans. Always try and pay more than the monthly minimum. If you pay the entire balance each month, for example, you won’t pay any interest down the road. One credit card is enough — juggling multiple bills and statements is a surefire way into credit card debt.
You should never get close to your limit, as this is often difficult to repay without exorbitant interest rates. Impulse buys are the bane of smart shoppers and money managers. You need to ask yourself, before buying anything, do you need this to live? Will you enjoy it for a long time, or is it a fleeting pleasure? Avoid shopping as a recreational activity, instead saving it for the essentials.
Never buy something just because it is on sale — you are still spending money, no matter how much the advertisement talks about “savings. Do your research before making any big-ticket purchases. Car shopping, for example, is not the time to turn into an impulse buyer. It is also not the time to get swept up in a sales pitch, no matter what the car dealer is trying to tell you. You can save tons of money by taking 2-3 hours to research cars, house, home theater systems, etc. Look up how much the object should cost and memorize the number.