Thanksgiving may be over, and we may be recovering from our food comas and trying to work off the extra pounds we put on, but that’s no reason to stop giving thanks for all of our benefits. For American investors, in particular, there are many things to be thankful for. When looking at all the options available to investors, there’s probably never been a better time in history for investors than right now.
1. Compound Interest
Compound interest is often referred to as the eighth wonder of the world. Interest compounding allows investors to make huge returns over the course of an investing career. Five percent interest might not sound as good as a ten percent growth rate, but saving at a lower rate for longer will almost always trump saving for less time at a higher rate. After 30 or 40 years of growth, even lower than ideal interest rates can result in some pretty massive retirement savings. Saving for a longer period of time, even at low growth rates, can use the power of compounding interest to outgrow those who save at higher growth rates for shorter periods of time.
2. Tax-Advantaged Accounts
Investors today have access to retirement accounts that previous generations could have only dreamed about. Standard 401(k)s and IRAs allow retirement savings to accrue tax-free, only being taxed at the time of distribution. That allows investors to save up pretty sizable nest eggs. Roth 401(k)s and IRAs allow investors to invest post-tax income and receive tax-free distributions when they retire. Regardless of whichever flavor of account you prefer, having those options available is a great thing.
3. Employer Matches on Retirement Savings
Not only do 401(k) accounts accrue tax-free, but many employers also match their employees’ contributions, normally at anywhere from 3-6% of the employee’s salary. While most employees take advantage of those programs, many more, unfortunately, do not. That’s a shame, because they’re essentially leaving free money on the table. An employee who makes $50,000 a year and gets a 4% match could have $167,000 in savings after 30 years at a 6% growth rate just from the employer match. At an 8% growth rate it would be nearly a quarter of a million dollars. That’s free money, no risk to you, benefiting you in retirement. So if you have that option, take it and be thankful for it.
4. Low Trading Costs
The retirement industry, and investing in general, has become so large and mainstream that companies fight for every last dollar of investors’ money. It’s a buyer’s market and you, the investor, are the buyer. Financial firms realize that they have to offer the best possible deals to get your business. That means that the cost of investing will continue to get lower and lower, taking up less and less of your valuable investment gains.
5. Easy Access to Financial Data
The Internet has really revolutionized investing. Investors are no longer reliant on poring over the stock pages in the business section of their local newspaper, or having to subscribe to specialized magazines and newsletters that arrive once a month. Investing websites, daily email newsletters, and other products are all over the Internet. Investors have all the financial information they could ever have wanted right at their fingertips. That extends even to their brokerages, who provide customers with specialized investment portals designed to keep them informed about everything they need to know about financial markets and investment accounts. With so much information out there, there’s no reason for any investor to continue to remain uninformed.
6. Plethora of Investment Options
Investments aren’t just limited to stocks, bonds, and CDs either. Financial innovation and a better understanding of risk vs. reward have expanded the number of options available to investors. Whether it be through a self-directed IRA or through other specialized investment vehicles, the range of investments available today is almost unlimited. And with more and more information available about those investment options, savvy and motivated investors can learn about all the pros and cons of their various investment options.
7. Legalized Gold Ownership
It may seem hard to believe today, but there was a time when it was illegal for US citizens to own gold. Unless you’re drawing a Social Security check, you probably are too young to remember when that was the case. But from 1933 to 1975, owning gold coins that weren’t in the form of jewelry or dental fillings was forbidden. Thanks to the committed work of gold advocates, those restrictions were undone, restoring the right of the American people to own and invest in gold.
Thanks to the continued effort by activists, the United States Mint finally began minting gold coins again in 1986. Further legislative changes since that time have opened up even further opportunities for investment in gold, so that investors can now hold gold in gold IRAs, offering all the tax advantages of traditional IRAs while still allowing investors to enjoy all the benefits of investing in gold.