“What the wise man does in the beginning, the fool does in the end” – Warren Buffett
According to studies, by the year 2035, Social Security funds will be nearly depleted. That means that anyone under the age of 40 can expect to receive very little or even no Social Security checks during their retirement. The benefit of having Social Security funds is so that you will be eligible to receive your retirement earnings. Unfortunately, research shows that the benefits may be exhausted by the generations before us.
How to Prepare
How do you prepare to live comfortably throughout your senior years, especially when there’s a threat that all funds will have been depleted before you reach that respectable age? The answer is to start planning and saving now through long-term investments. There are different investment vehicles that you can choose that will fit your lifestyle best.
What is a Long-Term Investment
Long-term investment means that you hold an asset for longer than one year. However, Warren Buffett believes that when you buy an asset, you should plan to keep it forever. According to author, Andrew Tobias, long-term investment has been proven to be more profitable than short-term. Tobias argues that the market rewards risks over the long run.
The chart provided by Statista.com shows some of the leading U.S. long-term investments for 2017.
Pros
Although investing long-term takes commitment and self-discipline, the sacrifice will be rewarding if you stick to it. Some benefits of long-term investments are:
- Compounding interest/wealth creation – Compounding interest allows you to make money from previous interest earned.
- Tax advantages – Majority of the long-term investment vehicles have specific tax breaks for investors.
- Peace of mind – Long-term investments will allow you to ease into retirement with minimal concerns about your finances.
Long-Term Investments
- Retirement accounts – employer sponsored 401K, traditional IRAs, Roth IRA
- Stocks
- Bonds
- Real Estate
- Life insurance policy
Cons
- Very little liquidity – You will have to jump a few hurdles to withdraw money from your account.
- Withdrawal Penalties – With most long-term investment vehicles, you will be penalized if you make withdrawals before you reach a specific age.
- Potential loss of money – With every investment you run the risk of losing money.
- Funds will be tied up for a long period of time.
Wrap Up
In order to be successful at anything, it takes patience and commitment. Long-term investments will require you to focus on the future. Contribute to your investments regularly so that you can reap the benefits later.
