Can you turn ‘be a millionaire day’ into reality?
If you look hard enough, you can find many obscure holidays, but few of them can instantly capture people’s interest as much as Be a Millionaire Day, which is “celebrated” on May 20. While amassing a million dollars may not be as significant a milestone as it used to be, most of us would still feel pleased if we could someday attain “millionaire” status. While there are no perfect formulas or guarantees, here are some steps to consider when working toward any investment goal:
Put time on your side. The earlier you begin saving and investing, the better your chances of reaching your financial goal. You can’t expect to “strike it rich” immediately with any single investment, but by investing year in and year out, and by choosing quality investment vehicles, you have the opportunity to achieve growth over time.
Pay yourself first. If you wait until you “have a little extra money lying around” before you invest, you may well never invest. Instead, try to “pay yourself first.” Each month, move some money automatically from a checking or savings account into an investment. When you’re first starting out in the working world, you might not be able to afford much, but as you advance in your career, you can increase your contributions.
This Mother’s Day, think of lifetime financial moves to help kids
If you’re a mother, you’ll probably get some nice cards and flowers on Mother’s Day. But of course, your greatest gifts are your children themselves. And since you want to see them happy and financially secure, perhaps you can use this Mother’s Day as an opportunity to consider ways to help your children at various stages of their lives.
So, let’s take a look at steps you can take:
What should you do with a 401(k) when leaving a job?
In the past, many people stayed at one job, or at least one company, for almost their entire working lives. When they retired, they could typically count on a pension, the value of which was based on their years of service and earnings. But today, workers can expect to hold several different jobs in their lifetime, and to a great extent, pensions have been replaced by 401(k) plans, which place much of the funding responsibility on employees. So, assuming you will change jobs at some point, and you do have a 401(k), what should you do with it?
Even with low rates, you can invest for income
Not long ago, the Federal Reserve (Fed) announced that it plans to keep short-term interest rates near zero until late 2014. The Fed initially pushed rates to that level in 2008, in an effort to stimulate economic growth. Clearly, low interest rates have a wide-ranging impact — but what effect will they have on you, as an individual investor?
If you need income from your investments, then the continuation of ultra-low interest rates may be a matter of some concern, particularly if you own certain types of fixed-income investments, such as certificates of deposit. While CDs are insured, offer return of principal at maturity and provide regular interest payments, they are not risk-free. With low interest rates, you risk losing purchasing power.
Put time – and tax-advantaged investments – on your side
If you’re relatively young, and you’ve been investing only a few years, you possess an asset that is invaluable and cannot be replaced: time. And the more time you spend contributing to tax-advantaged investments, the better off you may be.
As an investor, time is your ally for two reasons. First, the more time you give to your growth-oriented investments, the greater their growth potential. And second, the effects of market volatility have tended to decrease over time, though as you no doubt have heard, past performance is not a guarantee of future results.
Early IRA funding can pay off over time
You’ve got until April 17 to contribute to your Individual Retirement Account (IRA) for the 2011 tax year. That’s not a lot of time, but if you have some money available, and you haven’t completely funded your IRA for 2011, consider doing so before the deadline. And once you’ve “maxed out” on your IRA for last year, why not get a jump on 2012?
Actually, you could have started contributing to your 2012 IRA as early as Jan. 2. In fact, if you can get into the habit of fully funding your IRA each January, you’ll give your money 15 extra months of growth potential, as opposed to waiting until mid-April of the following year. If you factor in all the years you’ll be contributing to your IRA before you retire, those extra months of growth opportunities, repeated over decades, could end up providing you with a fair amount of extra cash when you start tapping into your IRA at retirement.
Are you prepared for long-term care costs
Like everyone else, you hope to remain physically and financially independent your entire life. And you may well achieve this goal. Nonetheless, the future is not ours to see, so you’ll want to prepare yourself for as many contingencies as possible — one of which is the high cost of long-term care.
As you may know, long-term care primarily refers to nursing home expenses, but it also includes services provided in your own home. In either case, though, it could be expensive.
The national average rate for a private room in a nursing home was more than $87,000 per year in 2011, according to the 2011 MetLife Market Survey of Long-Term Care Costs. The same survey found that the average private-pay hourly rates for home health aides and homemaker companion services were $21 and $19, respectively.
Maxed out on your ira and 401(K)? what’s the next step?
If you are contributing the maximum amount to your 401(k) or other employer-sponsored retirement plan each year, that’s good. And if you’re also “maxing out” on your Individual Retirement Account (IRA) annually, that’s even better. But what then? If you’re already fully funding your 401(k) and IRA, can you put away even more for retirement? Should you?
The answer to this last question is almost certainly “yes” — because you could spend a long time in retirement. How long? Consider these statistics from the Society of Actuaries:
Give your portfolio a ‘spring cleaning’
Springtime is almost here. If you’re like many people, the arrival of spring means it’s time to spruce up your home. But why stop there? This year, consider applying some of those same spring-cleaning techniques to your investment portfolio.
Here are some ideas you may want to put to work:
Become familiar with these five key areas
As an investor, what are your goals? You can probably think of quite a few — but over the course of your lifetime, your objectives typically will fall into five key categories. And once you’re familiar with these areas, you can start thinking of what they’ll mean to you in terms of your financial and investment strategies.
So, let’s take a look at each of these areas and see what they might entail for you:
