A COUPLE in their fifties has revealed why they are still scared of retiring even with $2,000,000.
Financial guru Dave Ramsey told them they must learn to accept risk if they want their money to work for them.
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Lauren from Richmond, Virginia, called The Ramsey Show to share her and her husband’s fears about retirement.
They were both in their 50s and wanted to retire soon, but felt they had left it too late to make smart decisions with their money.
“We feel like we missed the financial boat and are worried now that maybe we missed a way to help us retire,” Lauren said.
She and her husband never invested in the stock market after watching the market crashes in 2001 and 2008.
However, they managed to save $2,000,000.
They kept all their money in cash, or Certificates of Deposit and bonds, which generated only small returns.
“You missed a lot of returns,” Dave said.
“You could have four or six million, but you still have $2 million, so I don’t think we can cry a river here.
“All we can do is think about the future.”
Dave told Lauren that she and her husband needed to forget their fears about market crashes and start investing.
PASS THE ROLLER COASTER
“You wouldn’t have lost all your money, you wouldn’t have been homeless,” he said, referring to previous market crashes.
“It’s a trip, but if you had ridden the roller coaster, you could have won $8,000,000.
“Even if the roller coaster breaks down, it has to really screw up to end up with nothing.”
UP OR DOWN?
Dave himself invests in the stock market and advises callers to do the same by purchasing mutual funds.
Mutual funds include a diversified set of stocks, bonds, and other investments.
Where to save retirement money
There are several different places you can put the money you have saved for retirement. Each has different tax advantages, but not all are available to everyone.
401(k) – an employer-sponsored retirement account. Contributions are made pre-tax and many employers will match a certain percentage of your contributions. Taxes are paid when funds are withdrawn in retirement.
Roth IRA – an individual retirement account. Contributions are made after taxes, but withdrawals in retirement are not taxed.
TSP (Thrift Savings Plan) – a retirement savings and investment plan for federal employees and members of the uniformed services. They work similarly to 401(k)s, but may have more limited investment options.
Pension – an employee benefit that obliges the employer to make payments to the employee upon retirement. Pensions are becoming increasingly rare.
Although the stock market may go up or down in a given year, history provides a guide to what might happen in the future.
The S&P500, which indexes the stock performance of 500 of the largest companies listed on US stock exchanges, has delivered an average annual return of around 10.26% since its creation in 1957.
However, the rate of return that any individual retirement portfolio will earn also depends on the performance of your investments, which can include stocks, bonds, mutual funds, REITs and more.
See what Dave warned a future retiree not to do with his $3,000,000.
And see if you know the answers to 13 Social Security questions that could prevent you from making “tragic mistakes.”
This story originally appeared on The-sun.com read the full story
