Pensions: What We Need And Why We Need Them
With the job market fluctuating and the cost of living sky high, the thought of making provisions for a retirement that is still forty years away can seem ridiculous. The reality is that people are living longer now. We can expect to be active and healthy well into our twilight years. Making provisions for them now, so that we don’t have to work later, is as essential as it is sensible.
What Are Pensions?
A pension is a regular payment that you, and often your employer, make into a fund for your retirement. You can not access these savings for years at a time, and they are invested on your behalf by the company with whom you have your pension. You can opt for different levels of risk, with high-risk investments yielding the highest returns. By investing your money on your behalf, the company who hold your pension are responsible for seeing it grow. They take a percentage of any returns on investments so there is an incentive for them to invest wisely. However, because there is always some risk associated with investment, your pension value can go down as well as up if the enterprises it is invested in loose value. You don’t have to restrict your retirement savings to a traditional pension scheme. It is your money, after all. However, the advantage of a pension scheme is that all the hard work is taken off your hands and your money is invested by experts.
What Are the Alternatives?
However you choose to invest your retirement fund, experts advise those of us in our 20s and 30s to invest our retirement funds in high-risk schemes. The thought process behind this advice is that we stand to make significant gains and still have time ahead of us to save should we suffer significant losses. The same experts suggest that you should move your money into a medium risk enterprise by the time you hit 40, moving it again to a very low risk scheme in the years prior to retirement. This is all very well and good, but where should you be putting it?
The value of so-called paper-based investments; stocks, mutual funds and bonds, can be influenced by a variety of factors. These include everything from government unrest, to the stability of the stock exchange and the economic health of the country. If you choose to invest your money in this kind of scheme, it pays to hire someone who knows what they are doing to handle your portfolio. Since these options are so volatile, many financial advisors will suggest that you spread your fund across a variety of options. This reduces the amount of money you make on investments, but also negates some of the risks. If your money is spread around, you are less likely to lose it all at once if one of your investments plummets.
Another option is to invest in a product that is less market dependant, like gold. Historically, this precious metal has held it’s value well, although it does still experience some fluctuations. Indeed, the gold price has repeatedly hit record highs over the past few years. If you have some savings already, a Gold IRA rollover is an easy way to invest them in physical gold. This kind of scheme gives you some peace of mind, since its value is less dependent on the influence of external factors.
Whatever option you choose, it is important to seek advice from a number of sources and continue to do so throughout your career. What’s right for you now might not be right for you in ten years time.
Ultimately, this is the single biggest investment in your future you will ever make, it pays to take the time and get it right.