Welcome to the 2-Minute Money Manager, a short video series in which we answer money questions submitted by readers and viewers.
As retirement approaches, today’s question is about planning and investing.It’s a time when you can’t afford to lose money while also trying to get the most out of your investments.That can be difficult.
Watch the video below to learn some useful information.Alternatively, scroll down to read the full transcript of what I said.
You can also learn how to submit your own question by following the instructions below.
Check out 5 Costly Retirement Investing Mistakes and Two Savings Accounts That Pay 10 Times What Your Bank Pays for more information.You can also use the search box at the top of this page to type in the words “retirement investing” and get a lot of information on this subject.
And be sure to stop by our Solutions Center if you need anything from a better savings account to debt relief.
If you have a question, scroll down past the transcript.
If you don’t want to watch the video, here’s what I said in it:
Hello, and thank you for visiting your 2-Minute Money Manager.This answer is brought to you by Daily Money Life, which has been providing the best in personal finance news and advice since 1991.
Today’s question is as follows:Anonymous is the source of this information.
I have seven years until I retire, and I have $100,000 in savings.What is the best way to invest this money in order to save for retirement? I’ll need it liquid.
I’ve got three things for you, Anonymous.
No1 The best gains are derived from the potential for pain.
Taking a small risk is the best way to increase your savings.When I say “take a risk,” I’m referring to the idea of putting a portion of your savings into the stock market.For a couple of reasons, this is difficult – especially for Anonymous.
For starters, because the stock market fluctuates, you should leave money in it for at least five years if you are investing for the long term.That’s pushing the boundaries of what Anonymous can achieve in a seven-year window.
Furthermore, the market has been rising for more than a decade, and I am not convinced it will continue to rise for much longer, so your plans should take that into account.In short, we could enter a recession in the next few years, and the stock market could plummet.For those two reasons, I’m not sure Anonymous should be taking such a big risk right now.Anonymous money is in a savings account, so it appears that Anonymous isn’t fond of taking chances.
For those with more time and a longer time horizon, a simple rule of thumb is to divide your age by 100 and invest that percentage of your savings in stocks, such as the Vanguard S&P 500 Index Fund in your 401k or IRA (look for a fund with low expenses).So, if you’re 65 years old, you’d invest 35% of your money in stocks.If you’re 35 years old, you’ll save 65%.
No2 Save money by shopping
If you can’t take the risk, at the very least try to get the best possible interest rates on your savings.Currently, some banks are paying nothing.Others are paying close to 2%, while others are paying close to 1%.Wouldn’t it be nice to earn 20 times your money on your savings account? All you have to do is look for and open a new insured savings account.The extra interest could help you supplement your retirement income (use a calculator like this simple savings calculator to figure out how much).The earlier you begin saving, the better.
This is something you definitely want to do, and it’s simple to do.Several websites, including MoneyTalksNews, are devoted to this topic.com simplifies the processSimply go to our Solutions Center and search for savings accounts to find rates that are significantly higher than what you are likely earning now.
That means you can make a lot more money without taking any additional risks by putting your money to work for you.You’re insane if you don’t at least try.
No3 Pay off your debts
Paying off a debt with a ten percent interest rate is the same as earning ten percent risk-free and tax-free.That is unbeatable.So, if you’re able to pay off those debts in order to save for retirement, do so.
I hope this clarifies your query, Anonymous.
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The questions I’m most likely to respond to are those that will pique the interest of other readers.To put it another way, don’t ask for super-specific advice that only applies to you.And promise not to hate me if I don’t answer your question.I try my hardest, but there are far more questions than I have time to respond to.
In 1991, I founded Daily Money Life.I’m a CPA with additional certifications in stocks, commodities, options, mutual funds, life insurance, securities supervision, and real estate.
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