5 Ways to Invest in Your Future (During a Recession)

The Great Recession, as it’s now being called, has upset the finances of many a tax-paying citizen.  And most people are finding it difficult to keep up with bills, much less contribute funds to retirement or other investments.  And yet, with social security on the way out during our lifetime and the cost of living increasing regardless of the state of our economy, it’s more important than ever to make your money work harder for you and ensure that you have what you need set aside for your twilight years.  So if you’re looking for ways to make your money grow even if all you’ve got is a few nickels to your name, here are five great ideas for investment that will pay off in the future.

1. 401K. If you’re not putting a portion of your pre-tax earnings into a 401K, you may as well be flushing your future down the toilet.  If your 60-year-old self could see you now, they would be cursing the folly of youth that left them in the poorhouse.  Contribute as much as you can (after the first couple of checks you won’t even miss it) and see if your job offers a matching program.  Some companies will match up to 6% of contributions from your total monthly pay, which means your account is getting a free boost.
2. Roth IRA.  These days, a 401K just isn’t enough to cover all your bases and keep you living in the style to which you will have become accustomed.  Although it can be difficult to set aside extra cash for this account every month, you don’t have to put in a lot (some have no minimum) and whatever you contribute will net you a tidy deduction on your taxes.
3. Self-directed IRA. This is an interesting way to invest your money and it works by using your retirement fund as an investment at your direction (rather than that of a financial service).  Say you want to start a business (or you have a friend or family member who is an entrepreneur).  You can opt to control the funds in your retirement account by investing in the company.  In this way, you can support a growing business and show a potentially huge return (through the receipt of both interest and a percentage of corporate gains).  The only caveat is that you’d better be pretty sure the business will be successful, or you’ve just lost your entire retirement fund.
4. Stock portfolio. A diverse portfolio can show significant returns on your money year after year, and you can put in as much or as little as you want (depending on the types of stocks and bonds you’re buying).  Stocks alone could net you as much as about 12-13% while bonds will bring in somewhere in the neighborhood of 4-5%, and CDs will get about 3%.  Still, all of these are better than the 1-2% (if that) you’ll earn annually from a savings account.  Just be sure to diversify so that a loss won’t ruin you.
5. Buy a house. With the housing market still circling the drain, now is the time to invest in real estate if you can secure a loan.  It’s a lot better than throwing away money on an apartment (which will show no return) and if you can afford to live there for several years, you could more than double your money when the market rebounds and hits its stride again.

Mike Thimmesch writes for J.G. Wentworth, the largest purchaser of future payments to individuals who hold assets in the form of structured settlements and annuities.