IRA Investment Choices

The advantages of saving your IRA savings

Once you start saving in an IRA, you’re taking a very important step to a good retirement. For most people, this isn’t enough. The next step is to invest your savings for long-term growth. The best way to save for long-term growth is by investing in stocks.

As long as you’re working in 2020, there isn’t an age limit to contribute to a traditional IRA. An act called “The Secure Act” was signed on December 20, 2019, which removed the age limit in which you can contribute to an IRA.

Stock prices outperform bonds and cash in long-term periods. If you have invested $100 in stocks in 1926, that value would go up in $587,000 in 2020.

Still skeptical about investing in stocks? Remember, if you have about a decade or more until your retirement, you can ride out market volatility as long as you continue to invest and save. When prices are low, it is often the best time to invest for long-term growth potential.

Your IRA Investment choices

IRAs allow you to choose from individual securities. Some examples are bonds, stocks, certificates of deposits, exchange-traded funds, or a “single-fund” option. Before you decide which investments to pick, you need to consider how you want to manage them.

Considerations for which investments you want:

What type of investor are you?

There is only one right way to approach investing, and it’s your way. You may be working with a professional, or a DIY investor. Your preferences can change over time as well. The main point is to understand your investing goals so you can make the right choices and have confidence for your financial future.

How much risk can you take?

Every investment comes with different levels of risks. Stocks are the most volatile and have higher potential for growth. If you can hold an investment for a long time, you may benefit from stocks. If you need money in a few years or don’t wish to have a lot of risk, consider a higher allocation to less volatile investments, such as bonds and short-term investments.

When do you need your money? 

A key to successful investing is learning how to balance your comfort level with risk against your time horizon. Invest your retirement nest egg too conservatively at a low age, and you will run the risk that the growth rate of your investments won’t keep up with inflation. If you invest too much when you’re older, you could leave your savings exposed to volatility, which could destroy the value of your assets at an age when you have fewer opportunities to make back your losses.