Most of us look forward to retirement, but our retirement nest eggs are not large enough to support us in our later years, leaving millions of us unprepared. It hasn’t been done yet. In fact, a whopping 29% of workers have less than $25,000 in savings, according to the 2024 Retirement Confidence Survey. Here’s what you need to know:
If you retire at age 62 and live to, say, 92, your retirement will last 30 years. You may need to save more aggressively. You can also effectively invest your long-term funds in low-fee S&P 500 index funds. Social Security can be important to your future financial security, but it may not pay out as much as you expect. The average monthly retirement benefit was just $1,920 as of August, or about $23,000 a year. (You can find out your own expected benefits at SSA.gov.) When planning for retirement, be sure to also plan for potentially expensive health care costs. According to Fidelity, “A 65-year-old retiring this year can expect to spend an average of $165,000 on health care costs by the time they retire.” (This includes over-the-counter medications, most dental services, and long-term care.) ) It is important to plan for your retirement. We should estimate our anticipated future spending needs and think about how to meet them. If possible, set up multiple sources of income, such as Social Security, dividend income from stocks, interest income from bonds and other savings, withdrawals from retirement accounts, rental income from real estate, and retirement income or annuities. That is wise. Although you are behind, you can improve your financial future in various ways. Working part-time may be helpful now and in the early stages of retirement. Simply delaying retirement for a few years can also be effective. That way, you can skimp on more money while reducing the number of years your nest egg can support you. For more information, visit Fool.com/retirement.
ask a fool
Q: What is the best way to start investing in stocks if I don’t have much money and don’t know much about investing? – ER, Midland, Michigan
A: It’s best not to start investing until you’ve read enough and have a basic understanding of what you’re doing. Check out books like The Little Book of Common Sense Investing: The only way to ensure your Fair share of share Market Return (Wiley, $27) and The Little Book That Still Beats the Market by John C. Bogle Why not try it? by Joel Greenblatt (Wiley, $28) and I’ll Teach You to Get Rich: Without the Guilt. There are no excuses. A 6-Week Program That Works,” by Ramit Sethi (Workman Publishing, $17).
If you’re ready to grow your money over time, you can start by investing in simple, low-fee, broad-market index mutual funds, such as those that track the S&P 500 index of 500 major U.S. companies. Sho. These index funds outperform most managed mutual funds over the long term and can be a great long-term wealth-building vehicle. Click on the Investing Methods tab on Fool.com to learn more.
Q: What is “run rate”? – WU, Salisbury, Maryland
A: This is an estimate of a measurement over a longer period extrapolated from a corresponding measurement over a shorter period. For example, imagine that the Home Surgery Kits (ticker: OUCHH) company is growing rapidly and had $50 million in sales last quarter. If you add up the past four quarters, your total sales for the year could be, say, $140 million. However, multiplying $50 million by 4 gives the company’s sales of $200 million. This more accurately reflects current sales.
my stupidest investment
We’ve all made purchases we regret, including some stocks bought during the frothy 2021-2022 period. They have recently decreased by 80% to 90%. ah!
A disappointing sell? I have that too. I bought a few shares of the semiconductor company Nvidia at $157 per share for its very high price-to-earnings ratio and rapid growth rate based on a little-understood new thing called artificial intelligence. I became anxious (AI). So, at $450 per share (almost 3x my money), I placed a stop loss order so that I could lock in some of my profits in case of a crash. The stock sold off after reaching $407 in after-hours trading. And now, with the recent stock price at $120 after a 10:1 split, I’ve managed to sell the winners and keep the losers, which is not the best strategy. Still, I made some money. Should, could, would. – BG, online
The fool replies: If you’re nervous, selling might be the right move. And you just sold part of your position in Nvidia, which could be a nerve-calming compromise. However, if you read and learn more, you’ll find that the price movements of many top stocks are quite volatile, and that fast-growing companies tend to command (and deserve) higher P/E ratios.
