Once you land full-time employment, your employer may offer the option to contribute to a company-sponsored retirement plan. You might reason you can’t afford to contribute, but you’re wrong. You can’t afford not to contribute to your retirement fund. If your company offers a matching contribution, that’s even more incentive to contribute as soon as possible. This is your chance to get free money—take it.
Steps To Take
- Start early. “Time is a critical element to investment success. It’s not timing the market as much as it’s time in the market,” says Dwight Raiford, senior financial planner and financial services representative at MetLife. Investing in your retirement as soon as you start your new job means you can benefit from tax-deferred growth and the power of compounding.
- Learn the basics. Get a firm grasp on asset allocation, diversification, and the role of taxes. “Asset allocation involves investing in all asset classes, such as stocks, bonds, natural resources, international, real estate, etc., and not just concentrating on one thing. It’s best to spread your investments as broadly as you can. Diversification involves not putting too much of your investments into any one asset. And third, aim for tax-deferred investing. Savings that accumulate untaxed, such as with a 401(k) allow you to earn more money for retirement,” Raiford says.
- Get the right mix. “For a new grad coming out of school at 22 years old, with 50 or 60 years of earning potential, I recommend a heavy weighing toward equities. Those just out of college should have 80% to 85% of their portfolio in equities or in an equity mutual fund and 15% to 25% in a fixed-income fund,” says Raiford.
Source: Black Enterprise | Sheiresa Ngo
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