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The 401K First Aid Kit: Stop Your Portfolio Bleeding and Get Back to Financial Health

What did it feel like? I wanted to invest some money I had saved up but knew nothing about investments.


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A friend of mine hooked me up with her sister who was an insurance agent. The cash value was guaranteed by the insurance company.

Volatility and your 401(k)

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Would you like us to take another look at this review? No, cancel Yes, report it Thanks! You've successfully reported this review. We appreciate your feedback. March 12, Imprint: You can read this item using any of the following Kobo apps and devices: Because converting these assets to cash can be difficult and costly, they lack liquidity. Why does this matter? The main reason is because of the unexpected expenses you will inevitably face after retirement. What if your house is damaged by a storm and needs repairs?

3 Ways Your k Contributions Will Profit More Than Any Other Investment | K Maximum

What if your car gets stolen? What if you have sudden medical expenses to pay? All those things require cash. Unexpected expenses are why liquidity is so important. No one can plan for every occurrence. We have to expect the unexpected. To put it simply, inflation is the rate at which prices for goods and services go up, while the value of currency goes down.

Unfortunately, retirement costs a lot more than even the most expensive of candy bars, and it lasts a lot longer, too. As a result, the impact of inflation can hit harder. When you think about all the costs that come with retirement living expenses, medical expenses, spending on leisure then the thought of living on half your income should be sobering indeed. Keep in mind that I said proper investing is crucial. There are many ways to invest that, while useful, can also be negatively impacted by inflation.

For example, take bonds.


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When you buy a bond, you basically loan money to an entity either corporate or governmental for a specific period of time. During that time, the entity pays you back at a fixed interest rate. When the term has ended, you then receive back the initial amount you invested to do with as you please. Bonds can be a good way to generate consistent income for yourself, but again, you have to factor in inflation.

When inflation rises, so too do interest rates. When interest rates rise, the value of bonds decreases. So if inflation rises during the term you hold a bond, then the price of your bond will fall. Actually, fixed income investments in general can be negatively affected by inflation.

As you may know, these types of investments pay a steady stream of money in interest, and then return a predetermined amount to you upon maturity. But with inflation, the value of that money can diminish every year. That makes it much harder to buy the goods and services you need. The point is that inflation should take its place at the top of your list of things to prepare for. If you plan ahead, there are ways to protect yourself from a drop in purchasing power.

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You owe it to yourself to see your earnings grow rather than diminish. There are a lot of factors to consider when it comes to retiring successfully. But there are two in particular that should be near the top of every list:. Why are these two so important?


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  • To put it bluntly, it all comes down to this simple rule. You cannot retire successfully unless your income is more than your expenses. It sounds like a no-brainer, and it is. Retirement is all about finally having the time and opportunity to try new things, go new places, and learn new skills. Here again is why income is so important.

    All those things cost money. This is what you need to do.

    Fern Alix LaRocca

    First, sit down and calculate what your income and expenses are now. Here are some questions you need to answer. Remember, this can include mortgage payments, car payments, credit card payments, etc. Whatever number remains is what you have to save for retirement. An example is health insurance.

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    If you receive health insurance from your employer, your expenses for this could go up after you stop working. For instance, if you stop commuting to work on a daily basis, your transportation expenses will probably go down. Will it change after you retire and start earning less income? The study cited assumes that the husband will live 17 years and the wife 20, and have no employer-provided health care coverage. Of course, those figures could increase if you have any existing health conditions, like diabetes. But whatever your number is, how much of it will you have to pay out of pocket?