How to Overcome Your Fear of Investing and Build Your Dream Retirement
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I’m going to hit you with the cold, hard truth: You’re probably not investing enough money to be able to afford the future of your dreams, and your fear of investing is to blame. Don’t believe me? Let’s see if any of these statistics describe you:
- 2/3 of Americans aren’t putting any money in their 401(k)
- Millions of people don’t even have access to a workplace-sponsored retirement plan
- 24% of people 65 and older depend upon Social Security for 90 percent of their retirement income
- 1 in 3 Americans have no retirement savings
- A majority of family budgets prioritize student loan payments, savings for kids’ college funds, new vehicle payments, and family vacations over retirement investing
- 56% of Americans have less than $10,000 saved for retirement
- Women are more likely than men to have no retirement investing plan
- Only 1 in 4 people over age 55 have saved more than $300,000 for retirement
How many of these statistics describe you?
If not many, you’re probably in great shape with your investing.
If more than one describes your situation, you have some work to do if you’re going to retire comfortably.
The first step lies in overcoming your fear of investing.
9 Stupid Reasons to Put Off Investing for Your Retirement
Life is full of many uncertainties and only a few certainties. One major certainty for nearly all of us is the fact that we will need to retire someday. Trading our time and skills for earned income can only go on for so long.
So why do you so many people live like investing is unnecessary or optional? You guessed it: a combination of the fear of investing and lack of understanding.
Consider the following reasons that may be holding you back from investing in your dreams:
1. You have too much debt
Student loans, car payments, credit cards, home equity lines, and first and second mortgages make it possible to borrow lots of money, but lots of payments come with lots of loans! As a result many people don’t have much money left to invest.
2. You don’t know where to start
Investing seems too nuanced and sophisticated to many people, so they just don’t bother to start learning the ropes.
3. You don’t understand how investments work
Similarly, many people have a desire to invest and know they should be investing, but they are paralyzed by a fear of investing and lack of basic understanding of investment options. Words like bonds, stocks, mutual funds, annual return on investment, IRAs, and index funds are SCARY!
4. You’re planning to live off Social Security
Like Dave Ramsey sarcastically reminds us, the government is well-known for its ability to take care of money. Still, many people look to Social Security as their only source of retirement income.
5. You’re expecting an inheritance
Inheritance money can be an incredible blessing, but relying on it instead of investing consistently is a huge risk. Long-term care costs for their elderly are always on the rise, and many nest eggs have been cracked and scrambled by these costs.
6. You’re afraid to lose money on investments
I get it. Nobody wants to lose money. But losing money from time to time is part of the game of investing. The obvious goal is to win more than you lose, but like hockey great Wayne Gretzky said, “You miss 100% of the shots you don’t take.”
Investing isn’t a spectator sport; you have to play to earn money! If you allow the fear of investing to keep you out of the game, you’re guaranteed to lose.
7. You don’t have the knowledge to choose your own investments
Many would be investors have excitedly signed up for an online trading account only to realize that they’re not sure what to do next. The options seem limitless and unpredictable. So they put their money away in savings accounts and CDs instead and collect a very predictable but low interest rate.
8. You’re not willing to trust someone else with your money
Investment professionals are some of the least-trusted people in the financial world. Over the years, scandals and horror stories have legitimized these fears to some degree, though many true professionals are still out there. The sad truth is that many people aren’t willing to trust someone else with managing their investments.
9. You’re not willing to pay someone else to manage your investments
And even for those people who are willing to trust a professional with their money, management fees often scare them off in a hurry.
Overall, the fear of investing and the above barriers create three types of people:
- Those who actively invest (Investor) by overcoming their fear and getting the help they need
- Those who want to invest but fail to act (Aspiring Investor)
- Those who ignore the importance of investing (Non-Investor)
By the end of this article, my goal is to empower you to move yourself up the top of the pyramid by providing resources and tools to boost your confidence and start investing as soon as possible.
The Best Resources to Overcome Your Fear of Investing
The first step toward overcoming your fear of investing and getting on track toward your dream retirement is evaluating your current financial situation. You need to create a one page summary of your current debts, investments, and other assets. The best way to do this job only once is to sign-up for Personal Capital. With Personal Capital, you can monitor all of your financial accounts in one place, analyze your portfolio, and track your net worth all from your mobile device.
You’ll also need to create a budget – think of it as a map that will take you to your retirement dreams by keeping you on track every month – if you don’t have one. Even if you’ve never lived on a budget before, this is the time to start.
Next, you need to estimate your overall retirement needs. One of my favorite financial writers, Chris Hogan, has created a FREE tool to help you calculate the amount of money you’ll need to save to retire; he calls it your R:IQ. Take a few minutes and get your number – it’s free, and you won’t get bombarded with SPAM.
Now that you have a clear picture of your current situation and what you want to achieve, it’s time to make a plan to get there. Depending upon your knowledge, interest, and available time, you can take on full responsibility of your retirement portfolio, manage only some aspects on your own, or work with a dedicated adviser who can help you reach your goals.
If you want to spend many hours learning the nuances of buying and selling stocks, TradeKing is a good option for you. TradeKing provides a powerful platform for investors to discover, research, and purchase stocks, options, and ETFs. They also offer access to knowledgeable brokers who will answer questions or even manage your portfolio at a cost to you. If you open a new account and start with a minimum balance of $500, you’ll receive $5,000 in free trades if you sign-up using this link for FinanceSuperhero readers.
Looking for more guidance and support? TD Ameritrade offers the next level in investment services with no investment minimums to open your account. Investors can choose the Build It Yourself option, receive a managed portfolio recommendation from TD Ameritrade Investment Management, LLC, or get connected with an independent Registered Investment Advisor. Check out your options with TD Ameritrade here.
And if you’re looking for a simpler approach that is more hands-off, the popular robo-adviser Betterment is the best choice for you. Why approach investing the Betterment way? The Betterment portfolio is designed to achieve optimal returns at every level of risk. Through diversification, automated rebalancing, better behavior, Tax Loss Harvesting (selling a security that has experienced a loss to offset other gains), and lower fees, the Betterment approach to investing can help generate 2.9% higher returns than a typical DIY investor. And they still offer investors access to a licensed adviser over the phone. You can open a Roth IRA, Traditional IRA, or complete a rollover 7 days per week.
Note: If you have an old 401k from a previous employer still hanging around, Betterment will help you with your rollover and make the process as painless as possible.
As mentioned earlier, Personal Capital is the best FREE resource available for tracking all of your financial accounts, monitoring spending, and tracking your net worth all in one place. But they’re also one of the premier wealth managers today due to their integrated approach built upon a combination of innovative tools and the personal touch of a licensed adviser.
If you already have a sizable portfolio ($100,000 or more), I cannot recommend enough that you take advantage of Personal Capital's free consultation offer to analyze your portfolio. Yes, it’s really free, and if you don’t like the advice you’re given, you can continue to use the Personal Capital Dashboard to monitor your financial picture at no cost. If you’re impressed enough and convinced that Personal Capital will better manage your investment dreams better than they’re currently being managed, it’s also a win, as they will almost undoubtedly reduce your fees and improve your returns.
Get Started Now
Of course, these tools aren’t the only options available to help you overcome your fear of investing. You could visit a local brick-and-mortar adviser, read dozens of investment books for free at the library, or ask one of your connections for his best advice. You could search for the latest robo-adviser to pop up overnight. Any of these options is better than doing nothing, even if they’re incredibly risky.
My point is this: Don’t allow yourself to go another week without taking the steps to crush your fears and start investing in your future. Your family’s future is way too important to allow anything – lack of time, fear of investing, or uncertainty – to stop you from building a secure nest egg. Get started now!