How to Invest Money for Retirement

by Piper Li, Demand Media

    Like many hardworking breadwinners, you may anticipate your retirement as a time to kick back and relax, enjoying the finer side of life. Unfortunately, many individuals fail to plan for retirement, often creating the need to continue working far past the desired age retirement. Investing money for your future living expenses can help you plan for your golden years.

    Step 1

    Write down any debt you currently have to pay off. Pay off any high interest debt prior to investing in stocks and bonds. Carrying a balance on credit cards that charge high interest rates defeats the purpose of placing cash into investments that pay less in interest.

    Step 2

    Estimate how much money you need to save for your retirement. According to the U.S. Department of Labor, most people require between 70 and 90 percent of their pre-retirement income to continue enjoying their current standard of living. The specific amount you require depends on a variety of circumstances, such as debt level and current assets.

    Step 3

    Talk to your retirement plan administrator at your place of employment. Many companies and business offer their employees tax-deferred savings plans for retirement purposes, such as 401(k) plans, 403(b) plans, Keoghs, IRAs and SEP-IRAs. Your plan administrator can explain which type of plan your company offers and help you sign up to participate in this type of retirement fund. Placing money in this fund allows you to defer paying income taxes on the invested amount.

    Step 4

    Diversify your investments by dividing your retirement money throughout several areas, such as bond funds, money market funds and stock mutual funds. Consider the amount of risk you can afford when choosing your investment options. Banks and investment companies provide records of accomplishment of different money market funds and stocks, allowing you to see the rate of growth for different funds. Young individuals may be willing to take more risks with their investments than older individuals nearing the age of retirement. Review your investments statements frequently to determine whether your accounts perform satisfactorily for your desired level of risk.

    Tip

    • Consult a professional investment counselor or financial planner to help you determine the best ways to invest your retirement money. A professional can diagnose your current financial health and provide valuable investment advice.

    About the Author

    Piper Li, a professional freelance writer, began writing in 1989. Her articles appear online at Biz Mojo, Walden University and various other websites. She is the co-editor for "Kansas Women: Focus on Health." With a bachelor's degree in journalism from Mesa State, Li enjoys writing about health, horticulture and business management.