This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

As far as jobs go, mine is pretty great. It's flexible enough to work around my other commitments, and I get to help others learn important money management skills. But even so, I look forward to that day, decades from now, when I can leave the workforce and devote more of my attention to my hobbies.

I'm OK taking my time to get there because I want to make sure that when I do retire, I can afford to live comfortably. That mindset leaves me unwilling to take the following three risks with my money.

1. Making risky investments

Investing in penny stocks or meme stocks carries a small chance of becoming a multimillionaire quickly, but the odds of losing money are much greater. They're extremely volatile, and buying and selling at the right times to turn a profit are more a matter of luck than skill. Technically, all investments carry some risk of loss, but when you invest in strong, established companies, there's a greater chance your portfolio will do well over time. 

I prefer to spread my money between many stocks to reduce my risk of loss. An index fund is a great way to do this. It gives you instant ownership in hundreds of companies in several industries. And it's usually pretty affordable too. Most index funds only charge you a few cents to a few dollars per year to own them.

2. Keeping all my money in stocks

Stocks are considered riskier than some other investments, like bonds. But they also offer greater growth potential over the long term. Since I'm fairly young, I'm happy to accept this additional risk in the hope it will lead to larger returns down the road. But I also recognize the risk of keeping all my money in stocks, especially as I age.

As your nest egg grows, it's wise to move some of your money out of stocks and into bonds over time to protect what you have. This can help reduce your risk of significant losses on the eve of retirement. But you don't want to make this move too quickly or you could hamper your savings' growth.

A good rule of thumb is to keep 110 minus your age in stocks. So for a 40-year-old, that'd be 70% in stocks and 30% in bonds. And you keep adjusting your asset allocation a little at a time, until you reach 60% in stocks and 40% in bonds at 50 years old.

3. Underestimating my retirement needs

While many expect they'll need as much as $3 million to retire comfortably, others think they'll need $250,000 or less. I prefer to err on the side of the former group because I don't want to make the mistake of underestimating my expenses. If I drain my retirement savings too early, I may have to come out of retirement or give up some of the things I enjoy in order to pay my bills.

One simple strategy you can use to estimate your retirement costs is to save 25 times your annual expenses. This is supposed to help your money last at least 30 years. But your results may vary. You could also try using a retirement calculator and your own estimates of your annual retirement expenses to determine how much you should save.

It's OK to change your retirement plan over time if your lifestyle or financial situation changes. But don't let this uncertainty stop you from developing a savings strategy right now. Having a plan can help you stay accountable, and it can bring you some peace of mind as well.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post I can't wait to retire, but I won't take these 3 risks to get there appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Planning for retirement can seem confusing and complicated, so it's not surprising that two-thirds of retirees say they have regrets about how they prepared for it, according to a Clever Real Estate survey. More worrisome is the fact that many of today's workers continue to do the same things the retirees wish they hadn't.

If your goal is to retire comfortably, you should make every effort to avoid the following behaviors.

1. Waiting too long to start saving

Nearly half of all retirees surveyed said they regretted waiting so long to begin saving for retirement. When you're young, other priorities can seem more pressing than retirement, which could be 30 years or 40 years away. But many people don't realize they're actually making their goals more difficult by putting off retirement savings.

Ideally, our personal retirement contributions, which we set aside out of our paychecks, make up a small fraction of our total nest egg in retirement. The bulk of our life's savings should come from investment earnings, which we get from investing our personal contributions in stocks that we later sell for a profit.

Typically, if you've invested wisely, you'll end up with more earnings by holding on to your investments longer. If you only hold them for a short time, they have less opportunity to grow. In particular, stocks can be volatile in the short term, which is why it usually only makes sense to invest in them if you don't plan to spend the money within the next five to seven years.

Delaying retirement savings often means settling for less earnings. As a result, you must make up the difference with additional personal contributions, and that costs you in the long run.

For example, if your goal was to save $1 million by 65 and you expected to earn a 7% average annual rate of return on your money, you'd only need to save about $403 per month if you began saving at 25. But if you waited until 30 to start contributing to your retirement account, you'd now have to save $582 per month, or a little over $75,000 more of your own money during your working years.

2. Investing too conservatively in their youth

About a third of the retirees Clever surveyed said they wish they'd invested more in high-risk/high-reward investments, like stocks, while they were younger. This makes sense because when you're young, you can afford to take more risk.

If your investments do poorly in the short term, that's not always a big deal because you may not need to use that money right now. Often, your stocks will recover in time, and you'll earn a profit over the long term.

Investing too conservatively isn't as bad as taking too much risk, but just like putting off retirement savings, it forces you to set aside more money for retirement because you can't count upon earnings as much.

A simple rule of thumb is to invest 110 minus your age in stocks. So that's 80% in stocks for a 30-year-old and 70% for a 40-year-old. You gradually move your money into safer investments, like bonds, a little at a time to help protect what you have.

3. Dipping into retirement funds

Tapping into your retirement savings early may ease some short-term financial problems, but it can create much bigger headaches over the long term. You'll have to save more money going forward to get back on track, which can be challenging if your budget is tight.

Plus, you'll have to pay taxes on your withdrawals from tax-deferred retirement accounts.

Whenever possible, consider other ways to get the cash you need, like saving up for a purchase. Build up an emergency fund as well so you don't have to tap your retirement savings for unexpected costs.

This isn't a comprehensive list of retirement mistakes, but if you can avoid them, you're off to a pretty good start. Remember to review your retirement plan annually as well to track your progress toward your goal and identify opportunities to grow your savings more quickly. It doesn't have to take long, and you definitely won't regret making the time for it.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Retirees list their 3 major retirement regrets, and they're still unfortunately common appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Inflation is making life tough on everyone right now, but it's especially hard for retirees who have to make their nest eggs last an indefinite amount of time without a job bringing in steady income.

When your financial accounts are dwindling, borrowing money to tide you over can feel like your only option. But it often leads to longer-term problems, especially if you wind up with high-interest debt.

You may have other choices available to you, though. Here are four options to consider before you apply for a loan or charge a bunch to your credit card.

1. Get a job

Yeah, I know. Retirement is supposed to mean not working, but if you're in serious financial trouble, getting a job can be one of the surest ways to get out of it. You'll have a steady paycheck again, and you may even be able to add to your retirement accounts over time.

Getting a job doesn't have to mean going back to some corporate cubicle you hate, either. You can choose something that's a little more laid-back or in line with your interests. You can even start your own business.

2. Sell items you no longer want

If you have a lot of unused possessions, consider selling them to make a quick buck. This might not help you out long-term, unless you own valuable artwork, antiques, or something similar. But it could help you make ends meet for a little while until you can work out a better long-term plan.

It's pretty easy to sell most items these days. Just create a profile on a marketplace website or post the item on social media and await offers.

3. Look into government assistance programs

You might qualify for government assistance programs that can help you cover your essential costs. For example, blind, disabled, and low-income seniors may qualify for supplemental income from the federal government. If you're not sure if you qualify, check out the government's eligibility screening tools.

Explore the resources available to you at state and local levels as well. You may be able to get help paying for food, housing, medical care, and more.

4. Consider a reverse mortgage

A reverse mortgage is a kind of debt, but it might be a better choice for some than other types of debt, like credit card debt. Essentially, a reverse mortgage allows homeowners aged 62 or older to borrow against the equity they have in their homes. They can receive the cash as a lump sum, monthly payments, or a line of credit. And they don't have to repay the loan as long as they're alive and living in the home.

But there are a few catches. First, you need substantial equity in your home in order to be able to do a reverse mortgage. Also, when you die or permanently move out of your home, the balance of the loan comes due. This could make it impossible to pass your home on to your heirs if they're not able to pay it off.

You will still face fees and interest with a reverse mortgage, but you don't need an income or decent credit to get one. So it could be a good option if you don't think you could affordably borrow money elsewhere.

Sometimes, borrowing money might actually be a smart option for you. But don't rule out these other income sources without checking them out.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Running out of cash in retirement? 4 better options than taking on debt appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

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• Up nearly 300% in a year, this ASX stock just hit another record high
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• Leading brokers name 3 ASX shares to buy today

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

All investors make mistakes from time to time, and I'm no exception. I've lost money and missed opportunities to maximize my savings growth on multiple occasions. I'm not proud of it but I've learned a lot as a result of these costly errors.

Here are three I plan never to repeat -- and hopefully you won't either.

1. Not contributing to my retirement account regularly

I opened my first retirement account when I was 20 years old but there were several years I didn't contribute much, if anything, to it. I didn't have a ton of cash to spare back then and retirement seemed pretty far away, so I didn't think skipping a few years would make a difference.

Now, a decade later, I really wish I'd consistently put money away for retirement in my 20s. I understand now that those early contributions are some of the most important for my retirement. They're going to be invested the longest, so they can grow much more than contributions I've made more recently.

Fortunately, I learned from this mistake while I was still fairly young. Now, I make retirement contributions a high priority. I try to save at least 15% of my annual income each year and I set reminders to myself to make contributions monthly so I don't forget.

2. Investing in things I didn't understand

I bought some cryptocurrency during the 2017 boom without knowing too much about it. I had relatives who had made quite a bit of money trading crypto at the time and, like many others, I decided to try to cash in before prices went even higher.

While I did make a small profit, my limited crypto knowledge definitely hampered me. There were times when I bought coins while prices were high, only to watch them fall the next day. And sometimes I sold some when I could've made more money by holding onto them. Those errors may not have happened if I'd understood what I had and what was driving the extreme volatility. But as it was, I was often making decisions in response to the coins' recent performance.

Since then, I've learned that I can do a lot better by taking the time to understand my investments and focusing on their long-term growth potential. I tend to be wary of stocks that skyrocket overnight, like meme stocks, and do my best to tune out to a lot of the internet hype.

3. Not paying enough attention to investment fees

I didn't think much about investment fees when I first started investing, especially since they came directly out of my account. As a result, I can't be sure how much I paid in investment fees over the years or how much I could've saved if I'd focused on low-cost investments from the start.

Before I invest in anything today, I make sure to look into the fees associated with it and I try to keep these as low as possible so I can hold on to more of my earnings. One of the best ways to do this is investing in index funds. These bundles of stocks mimic the performance of a market index, and they instantly diversify your savings. They're also known for being really affordable. The best S&P 500 index funds only charge you about $3 per year for every $10,000 you have invested in the fund.

I can't go back and undo the investment mistakes I've made so far, but I can use what I've learned to ensure they never happen again. In addition to taking these steps, I also review my investments each year and look for opportunities to improve my portfolio's performance. That doesn't mean I'll never make any investing mistakes again, but I at least feel confident that I'll continue to improve over time.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Investing fails: I never want to repeat these 3 embarrassingly bad moves appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Motley Fool has a disclosure policy.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The stock market turns ordinary people into millionaires every day, and it's actually one of the easiest ways for the average person to grow wealth. The sheer number of investment options can be intimidating and the risk of loss concerning, but overcoming those obstacles is actually a lot easier than you think.

Here's a look at one of the simplest ways you can turn $10,000 into more than $450,000 using the stock market.

How does the stock market grow your money?

When you invest in a stock, you buy an ownership stake in a company at whatever the current market value is. You can hold on to that for as long as you'd like. Then, when you need money, you can sell it at whatever the current market value is. The difference between what you initially paid for the stock and what you sell it for is known as your earnings.

If you've invested wisely, the market value of your shares should go up over time. Stock prices can change wildly in the short term, sometimes rising and falling many times within a single day. But over the long term, the S&P 500, one of the best-known market indexes, averages about a 10% return per year.

That means that if you invested in an index fund containing all the same stocks as the S&P 500, you could also see your savings grow by an average of about 10% per year over several decades. Your actual return will likely be a little less than that of the index itself because index funds charge annual fees to shareholders. However, these fees are usually pretty low, amounting to a few dollars per year for most people.

How to turn $10,000 into over $450,000

If you invested $10,000 into an S&P 500 index fund today and it had a 10% average annual rate of return over the next 40 years, you'd end up with nearly $452,600. And that's without ever investing another dime after the initial $10,000.

Those who routinely invest more money could end up with a much larger sum, as could those who reinvest their dividends -- or excess earnings that companies split with their shareholders. Not all stocks pay them, and those that do usually only pay them quarterly. They're often only a few dollars, but they can still add up over time, especially after being reinvested for a few decades.

Now, I imagine some of you are thinking, "That's great for someone who has $10,000 to spare, but I don't". And the good news is you don't have to. You can reach the same $450,000 over 40 years by investing less than $81 per month, assuming you still earn a 10% average annual rate of return.

You'll contribute more of your own money this way. Investing $81 per month for 40 years will cost you close to $39,000. That's because a lot of your funds won't be invested for the full 40 years. But it's a lot easier for most people to set aside a few dollars every month than to come up with thousands of dollars all at once.

The beauty of investing this way is its simplicity. All you have to do is keep putting in money, and the index fund will do the rest of the work for you. It'll automatically give you an ownership stake in hundreds of companies across several industries, so your savings are diversified. This helps reduce your risk of substantial loss. 

The only other thing you really need is patience. You will likely experience some ups and downs along the way, but as long as you trust your investment strategy and avoid emotional decisions, you can grow yourself a pretty substantial nest egg over time.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Motley Fool has a disclosure policy.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Let's say you stumble across a stock you've never heard of before that has generated amazing annual returns of 20% or more year after year. Would you immediately add it to your portfolio? If you're smart, you'd answer no. What if Warren Buffett recommended it? Your answer should still be no.

The reasoning is simple: If you've never heard of the company before, you probably don't have any idea how it makes its money. You might be thinking, "Big deal. Look at those returns!" But I promise you, it is a big deal, and below, we'll look at why.

Why you need to know how a company makes its money

When you purchase a stock, you're investing in a company and betting on its future success. But if you don't know how it makes its money, you won't be able to tell when it's headed for a fall. 

Understanding a company's business model can help you better predict how its leadership's decisions and industry trends could affect the company's stock price. For example, let's say in a bizarre parallel universe, Netflix (NASDAQ: NFLX) decides to go back to its old way of doing things, foregoing the streaming service we've all come to know and love and instead shipping old-fashioned DVDs to your door. 

As someone who presumably understands how Netflix works and why it's so successful, you would be able to tell that that move is going to be bad for business and that Netflix's stock price is probably going to drop. But if you had never heard of Netflix and weren't able to guess what it does from the company name, you might not realize its leaders have just made a terrible mistake. If you buy its stock just to hop on the bandwagon with everyone else, you could find yourself facing huge losses in this scenario. 

Understanding how a company makes its money can also help you identify when it's doing well and when it might be time to buy even more of its stock. If Apple releases the iPhone 13 later this year to rave reviews, that could clue you in to the fact that the company is doing a great job at producing products people want -- and that could be a good time to invest more in its stock.

How to choose the best stocks for you

Investing only in companies you know well is what Warren Buffett refers to as investing in your "circle of competence." If you're new to investing, you may not think that's very large, but it's probably bigger than you think. You don't need to understand every business decision a company has ever made. You just need to have a general idea of how it makes money.

If you've ever used Netflix -- or even if you're just familiar with what it does -- that falls into your circle of competence. Same goes for the manufacturers of the groceries and household items you buy every day. You probably also know how airlines, auto makers, and retail stores make their money, so they're potentially good investments for you too.

Your job might also open up more companies you can add to your circle of competence. For example, if you work in the tech industry, you might know about some more obscure tech stocks that an outsider may not be familiar with. These are all good places to start when deciding what you'd like to invest in.

What if I want to invest in a company I don't understand?

To return to our fictional company stock with the 20% annual returns, let's say you're interested in possibly investing in it but you're not familiar with what the company does. That doesn't mean you can't add it to your portfolio. It just means you shouldn't do so right away. 

You need to do your research first to familiarize yourself with how the company operates, why it's been so successful to date, and whether its stock has the potential to continue providing these outstanding returns in years to come. 

There's no magic stat that can tell you whether a company's worth investing in. There are many factors to consider, including a stock's price-to-earnings (P/E) ratio, its debt-to-earnings ratio, its management team, and industry trends. As you become a more experienced investor, you'll learn how all these factors play into one another and how to identify the truly valuable stocks from the ones that aren't worth the hype. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post This is a surefire sign you shouldn't invest in a stock appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• NextDC vs Wesfarmers shares: Which is a buy?
• Best and worst case scenarios this week for global equities: Expert
• Up nearly 300% in a year, this ASX stock just hit another record high
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• Leading brokers name 3 ASX shares to buy today

Kailey Hagen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple and Netflix and recommends the following options: short March 2023 $130 calls on Apple and long March 2023 $120 calls on Apple. The Motley Fool Australia has recommended Apple and Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.