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Investing

Want to Retire Early? Here’s How

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Many of us dream of retiring early, which may mean different things to different people. If you get an early start, you’ll have a better chance of achieving that goal.

For example, someone who begins working right out of college at the age of 22 and retires at the age of 65 has 43 years to save for retirement. According to the Social Security Administration, a male’s life expectancy is just over 84 years on average, while woman can expect to live until almost 87. That means a retirement of 20 years or longer from a normal retirement age is possible.

However, if you’re in your 30s or 40s and just starting to save for retirement — or if you’re just behind in general — it will take some extra planning and additional risks to get there.

What does retirement mean?

In our parents’ and grandparents’ generations, retirement typically meant they worked until retirement age (generally 65). When they retired, they stopped working and lived off their savings, employer pensions and Social Security.

However, retirement has evolved, and pensions are rare today. Many people are working two or three jobs to make ends meet and are pinched for spare money to build a nest egg for retirement.

So, where do you start if you’re in your mid-30s with an early retirement date? First, you should get a financial checkup.

Crunching the numbers

You’ll need to crunch the numbers to determine when you can comfortably retire. Set a retirement budget based on your desired lifestyle.

You also will need to take into account all your retirement savings and potential financial resources. That goes beyond savings and retirement accounts and encompasses any other assets that could be converted into retirement income. Also consider other sources of income you might receive, ranging from a pension to Social Security, including any of the below investments:

  • Workplace retirement accounts such as 401(k)s, 403(b)s, governmental 457(b)s, pensions, SIMPLE IRAs, etc.
  • Roth and traditional IRAs
  • Self-employed retirement accounts like SEP IRAs and solo 401(k)s
  • Annuities
  • Taxable investment and brokerage accounts
  • Cash, savings accounts, CDs and similar vehicles

Social Security and pensions

Although Social Security might not seem relevant to people who are retiring early, it can be a good source of income that kicks in during retirement and could help extend other retirement assets at a key time in your life. While Social Security is an income stream you may want to include in your retirement financial forecast, it also makes sense not to heavily rely on it as a large contributor.

Pensions are becoming increasingly rare, especially in the private sector, but they are more prevalent in the governmental and nonprofit sectors. With most pensions, if you work a certain number of years, you become vested in a benefit, but it might not be available until you hit a certain age. Even if you retire early, you may be entitled to a pension benefit, so you should be sure to understand the details.

Once you have taken stock of your financial resources, you will need to figure out how much retirement income those resources translate to. This can be a complicated task, as you will need to make some assumptions about how your investments will be allocated, the long-term returns from your investments and a withdrawal strategy. Evaluating and rebalancing your portfolio should be an annual occurrence.

There are a number of retirement calculators that can help, or you can work with a fee-only financial advisor to help with your retirement plans. You may want to consider Vanguard, Schwab and Financial Mentor, among others. If you come up with a gap between your desired cost of living and your projected income, you will need to make some changes in your savings strategies.

How to retire early by saving

To start, you should take full advantage of employer matching if it’s available. This is free money given to you just for saving for your future. A good strategy is to defer enough each pay period to earn the full amount of the match. For example, if your employer matches 3% of your salary on the first 6% contributed, that is approximately a 50% return on your money.

You should strive to max out your retirement plans by contributing the maximum allowed to your 401(k) and IRA. Contribution maximums vary by plan; for example, a 401(k) has an employee contribution limit of $19,000 for 2019. IRAs have varying contribution limits as well, such as $13,000 for a SIMPLE IRA and $6,000 for traditional and Roth IRAs.

If you’re in your 50s, you have additional options for retiring a few years early. Catch-up contributions are available to those age 50 and older. For IRA accounts, an additional $1,000 can be contributed each year over the $6,000 cap for 2019. For 401(k)s, 403(b)s and some other employer-sponsored retirement plans, an extra $6,000 can be contributed on top of the $19,000 cap for 2019. SIMPLE IRA plans allow an extra $3,000 in catch-up contributions.

Retire early by being frugal

Another way you can rev up your savings strategy is by cutting back on things that burn a hole in your wallet. Cut back on current living expenses to carve out more of your income to devote to retirement savings.

People who are behind on their retirement savings should “increase their savings rate by reducing the Big Three of housing, transportation and food,” said money coach Steven Donovan of Even Steven Money. “Assuming your income stays the same, reducing your major expenses will create the largest gap and fastest way to ramp up your retirement savings.”

Donavan learned by personal experience.

“My personal example of housing is purchasing a multi-unit building in the city of Chicago. We lived on the top floor while renting out the other units in the building for income,” he said. “This eliminated most of our housing costs and allowed us to have a higher savings rate because of it. The money was then added to our investment of choice: paying down real estate or investing in taxable and nontaxable investments.”

Another way to increase the gap between your income and expenses is to start a side hustle or get a second job. Side hustles can serve a dual purpose; as they grow, they might be a vehicle for income when you do retire early that allows you to generate income while working on your own terms in retirement.

Risks of early retirement

Although early retirement sounds glamorous (because who wants to work forever?), there are some trade-offs you should consider. For example, paying for health care that previously was covered by your employer can be a huge expense.

“The biggest factors that make early retirement different from ‘normal retirement’ are health care and where your income or withdrawals will come from,” said Katie Brewer, certified financial planner, virtual financial planner and owner of Your Richest Life. “Medicare doesn’t kick in until age 65, so someone retiring in their 40s or 50s will need to cover their health insurance until age 65 through an individual policy, a spouse’s policy or a health sharing plan.”

There are a number of fees and rules that apply to early withdrawals as well.

“As far as income goes, regular retirement plans have stipulations on when you can take the money out. There is usually a 10% IRS penalty when taking money out of retirement plans before age 59 and a half,” said Brewer. “Someone wanting to retire early will want to save into a nonretirement account, such as a regular brokerage account, to give flexibility on when to take money out without penalty.”

For 401(k) and public sector plans, there are exceptions if you leave your company at age 55 or later. In other cases, you can take advantage of the 72(t) rule. This rule allows penalty-free withdrawals from IRAs, 401(k)s and 403(b) accounts and requires the account owner to take equal withdrawals for at least five years or until they reach the age of 59 and a half, whichever is longer.

The bottom line

Retirement is tough at any age. Early retirees face the challenges of funding a longer retirement period and saving over a shorter period of time. Even if you get a late start, early retirement is achievable, but it will take some serious planning and discipline.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Roger Wohlner
Roger Wohlner |

Roger Wohlner is a writer at MagnifyMoney. You can email Roger here

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Investing

J.P. Morgan You Invest Review 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Chances are you’ve heard of J.P. Morgan Chase. It’s one of the major players in the financial space, and it’s long had a brokerage arm in addition to providing global banking services. Now, though, J.P. Morgan is getting into the online brokerage space with You Invest.

You Invest is an online trading platform that allows you to buy and sell individual stocks and exchange-traded funds (ETFs) without the need for a human broker. This review will look at what’s offered and provide you with the information you need to decide if it’s right for you.

You Invest offers a way for you to seamlessly connect your Chase bank account to your brokerage account. Additionally, you end up with access to plenty of educational materials and the ability to understand your total portfolio.

J.P. Morgan You Invest
Visit J.P. MorganSecuredon J.P. Morgan You Invest’s secure site
The bottom line: You Invest offers a fairly standard online brokerage experience with the perks of low-cost trading fees and a wealth of investor education.

  • Pay just $2.95 per trade after receiving 100 free trades.
  • Enjoy a large selection of investments, including stocks, bonds, mutual funds and ETFs.
  • Manage investments according to goals with the Portfolio Builder tool.

Who should consider You Invest

You Invest is ideal for beginning investors, especially those looking for education and assistance building a portfolio that will help them reach their goals. Intermediate and advanced investors also can benefit, but the educational tools and resources are especially helpful for novice investors.

Additionally, it connects to your other Chase accounts, making it easy for you to move money from your bank account to your brokerage account and vice versa. If you already bank with Chase, using You Invest to manage your portfolio might not be a bad choice.

While $2.95 per trade is a low cost, this product might not be the best choice for active traders. For traders who can keep their trade volume low, this can be an excellent brokerage since you receive 100 free trades in the first year after an account is opened — with the opportunity to qualify for more free trades in subsequent years.

J.P. Morgan You Invest fees and features

Current promotions

Up to 100 free trades

Stock trading fees
  • $2.95 per trade
  • $0 per trade for Chase Private Client, Chase Sapphire Banking, J.P. Morgan Private Bank and J.P. Morgan Securities clients
Amount minimum to open account
  • $0
Tradable securities
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $75 full account transfer fee
  • $75 partial account transfer fee
  • $0 inactivity fee
Commission-free ETFs offered
Offers automated portfolio/robo-advisor
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
Ease of use
Mobile appiOS, Android
Customer supportPhone, Chat, 5,100 branch locations
Research resources
  • SEC filings
  • Mutual fund reports
  • Earnings press releases
  • Earnings call recordings

Strengths of You Invest

The educational tools and insights provided by You Invest are where this offering shines. They help you find the right mutual funds and stocks, and get you to understand your investing needs.

  • Low trading fees: To start, you get 100 free trades from You Invest. After you use your allotment, trades cost only $2.95. Among online brokers that charge trading fees, this is one of the lowest. If you’re not an active trader, you might be able to avoid paying fees fairly easily. You can get more free trades each year if you use certain Chase banking products, such as Premier Plus Checking.
  • Educational resources: You Invest offers a number of helpful articles about investing, strategy and more. It’s possible for you to learn the basics and then apply them to your portfolio.
  • Portfolio Builder: If you have at least $2,500 in your account, you can take advantage of this tool designed to help you choose the right investments for your portfolio. You’ll receive guidance on putting together a portfolio based on your answers to questions designed to gauge your risk tolerance, investment goals and time horizon.
  • Powerful screening tools: You can use these tools to set parameters and then find assets that fit your requirements. A list of options appears, and when you’re looking at Mutual funds , You Invest also includes Morningstar ratings and analysis of where they might fit into your portfolio.

Drawbacks of You Invest

A review of You Invest wouldn’t be complete without a look at some of the downsides. In many ways, You Invest is a typical online brokerage option. Other than some of the educational and portfolio building tools, there’s not a lot to distinguish this from other brokers.

  • No standalone app: Rather than offering a standalone app, you access You Invest through J.P. Morgan Mobile. Until you get used to it, it can be somewhat disconcerting to navigate to your trading app within the regular app.
  • Limited account types: There are only two account options with You Invest: taxable and IRA. You can get a Joint taxable account as well as an individual account, and there is a Roth option with the IRA. However, if you’re hoping for a custodial account or 529, you won’t find it with You Invest.
  • No managed portfolios: Right now, you won’t find managed portfolios, but they are supposed to be coming in 2019. So if you’re more of a hands-off investor, you might want to wait until there are more options available.
Fees
$2.95 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

Up to 100 free trades

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

Get up to $600 when you open and fund an account within 60 calendar days of account opening, depending on deposited amount.

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

Cash bonuses are available for new accounts. Bonuses start at $50 if you deposit or transfer $10,000+.

Is You Invest safe?

Any investment comes with the risk of loss. However, You Invest is insured by the SIPC for up to $500,000. Additionally, J.P. Morgan is a member of FINRA. As a result, you’re reasonably protected — especially when you consider that this is a company with more than $1 trillion in assets under management. It’s not likely to fail.

Just make sure you understand your own risk tolerance before you invest. While insurance protects you from failure, you’re not protected from market losses.

Final thoughts

You Invest can be a great option for middle-of-the-road investors who want a little more flexibility in their portfolios but still need some guidance. There are a number of assets to choose from, and the educational tools and resources allow you to build a portfolio based on your long-term goals and expectations.

Depending on your goals, there might be other products that work for you. For those more interested in a hands-off approach, Betterment might be a more suitable choice. You also can make trades for less with a service like Robinhood. However, you might not get the same level of educational tools with Robinhood, and Betterment won’t let you personalize your portfolio to the same degree.

If you want a low-cost, personalized way to invest — learning as you go — and if you’re already a Chase customer, opening a You Invest account might be a good way to move forward.

Open a J.P. Morgan You Invest accountSecured
on J.P. Morgan You Invest’s secure website

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Miranda Marquit
Miranda Marquit |

Miranda Marquit is a writer at MagnifyMoney. You can email Miranda here

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Investing

How to Make Money in Stocks

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Putting money in the market is well-worn financial advice for a reason: Investing in stocks is one of the best steps you can take toward building wealth.But how, exactly, is that wealth built? How is money earned by purchasing stock market holdings, and what can you do to maximize the gains you make from your own portfolio?

How to make money in stocks: 5 best practices

The way the stock market works — and works for you — is as simple as a high school economics class. It’s all about supply and demand, and the way those factors affect value.

Investors purchase market assets like stocks (shares of companies), which increase in value when the company does well. As the company in question makes financial progress, more investors want a piece of the action, and they’re willing to pay more for an individual share.

That means that the share you paid for has now increased in price, thanks to higher demand — which in turn means you can earn something when it comes time to sell it. (Of course, it’s also possible for stocks and other market holdings to decrease in value, which is why there’s no such thing as a risk-free investment.)

Along with the profit you can make by selling stocks, you can also earn shareholder dividends, or portions of the company’s earnings. Cash dividends are usually paid on a quarterly basis, but you might also earn dividends in the form of additional shares of stock.

Micro-mechanics of how stocks earn money aside, you likely won’t see serious growth without heeding some basic market principles and best practices. Here’s how to ensure your portfolio will do as much work for you as possible.

1. Take advantage of time

Although it’s possible to make money on the stock market in the short term, the real earning potential comes from the compound interest you earn on long-term holdings. As your assets increase in value, the total amount of money in your account grows, making room for even more capital gains. That’s how stock market earnings increase over time exponentially.

But in order to best take advantage of that exponential growth, you need to start building your portfolio as early as possible. Ideally, you’ll want to start investing as soon as you’re earning an income — perhaps by taking advantage of a company-sponsored 401(k) plan.

To see exactly how much time can affect your nest egg, let’s look at an example. Say you stashed $1,000 in your retirement account at age 20, with plans to hang up your working hat at age 70. Even if you put nothing else into the account, you’d have over $18,000 to look forward to after 50 years of growth, assuming a relatively modest 6% interest rate. But if you waited until you were 60 to make that initial deposit, you’d earn less than $800 through compound interest — which is why it’s so much harder to save for retirement if you don’t start early. Plus, all that extra cash comes at no additional effort on your part. It just requires time — so go ahead and get started!

2. Continue to invest regularly

Time is an important component of your overall portfolio growth. But even decades of compounding returns can only do so much if you don’t continue to save.

Let’s go back to our retirement example above. Only this time, instead of making a $1,000 deposit and forgetting about it, let’s say you contributed $1,000 a year — which comes out to less than $20 per week.

If you started making those annual contributions at age 20, you’d have saved about $325,000 by the time you celebrated your 70th birthday. Even if you waited until 60 to start saving, you’d wind up with about $15,000 — a far cry from the measly $1,800 you’d take out if you only made the initial deposit.

Making regular contributions doesn’t have to take much effort; you can easily automate the process through your 401(k) or brokerage account, depositing a set amount each week or pay period.

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

500 free trades with a qualifying net deposit of $100,000

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

Get up to $600 when you open and fund an account within 60 calendar days of account opening, depending on deposited amount.

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$500
Promotion
New accounts with a deposit of at least $5,000, may be eligible for a cash bonus, which can range from $100 to $2,500 depending on the amount deposited.

3. Set it and forget it — mostly

If you’re looking to see healthy returns on your stock market investments, just remember — you’re playing the long game.

For one thing, short-term trading lacks the tax benefits you can glean from holding onto your investments for longer. If you sell a stock before owning it for a full year, you’ll pay a higher tax rate than you would on long-term capital gains — that is, stocks you’ve held for more than a year.

While there are certain situations that do call for taking a look at your holdings, for the most part, even serious market dips reverse themselves in time. In fact, these bearish blips are regular, expected events, according to Malik S. Lee, CFP® and founder of Atlanta-based Felton & Peel Wealth Management.

So-called market corrections are healthy, he said. “It shows that the market is alive and well.” And even taking major recessions into account, the market’s performance has had an overall upward trend over the past hundred years.

4. Maintain a diverse portfolio

All investing carries risk; it’s possible for some of the companies you invest in to underperform or even fold entirely. But if you diversify your portfolio, you’ll be safeguarded against losing all of your assets when investments don’t go as planned.

By ensuring you’re invested in many different types of securities, you’ll be better prepared to weather stock market corrections. It’s unlikely that all industries and companies will suffer equally or succeed at the same level, so you can hedge your bets by buying some of everything.

5. Consider hiring professional help

Although the internet makes it relatively easy to create a well-researched DIY stock portfolio, if you’re still hesitant to put your money in the market, hiring an investment advisor can help. Even though the use of a professional can’t mitigate all risk of losses, you might feel more comfortable knowing you have an expert in your corner.

How the stock market can grow your wealth

Given the right combination of time, contribution regularity and a little bit of luck, the stock market has the potential to turn even a modest savings into an appreciable nest egg.

Ready to get started investing for yourself? Check out the following MagnifyMoney articles:

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jamie Cattanach
Jamie Cattanach |

Jamie Cattanach is a writer at MagnifyMoney. You can email Jamie here