Categorized | Investing, Retirement

How Long-Term Retirement Investing Pays Off


Long-Term Retirement Investing Requires Consistency

Long-Term Retirement InvestingFor many investors, it is hard to comprehend how long-term retirement investing pays off in the long run.  While investing a few thousand dollars per year in the stock market for retirement may seem like a waste of money, the reality is that investing just a few thousand dollars per year in the stock market, on a consistent basis, can lead to immense long-term retirement investment gains of hundreds of thousands of dollars.  The key to long-term retirement investing is to start early and to consistently invest in the stock market to reap the long-term stock market investment gains that compound and increase over long periods of time.

How Long-Term Retirement Investing Pays Off In The Long Run

This may sound hard to believe, but investing in a retirement account by a person in their early twenties of a $5,000 per year can blossom into well over $700,000 by the time they are ready to retire.  The key to long-term retirement investing is to consistently transfer $5,000 per year (or what you can afford) into a retirement account, such as an Individual Retirement Account (IRA), and then invest the money in the stock market.  While the stock market has its up years and down years, over long periods of time, the stock market consistently returns an average of 7% per year for long-term investors.  An important aspect of long-term retirement investing is to start investing as soon as possible, because the returns in the later years increase dramatically based on how long one has been putting money into a retirement account, as the gains compound substantially in the later years.

One strategy for getting ahead with long-term retirement investing is to invest in dividend paying stocks, as dividend paying stocks increase annual stock market returns and in the long run lead to bigger long term investment gains.  While the stock market provides annual 7% returns over long periods of time, these gains are very inconsistent and require holding through up and down markets.  The advantage of long-term retirement investing via dividend paying stocks is that these stocks pay returns in up, down, and sideways stock markets.  They also appreciate in price when the stock market experiences broad advances, so they provide the best of both worlds for long-term retirement investing.

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