How to Start an American Funds Retirement
American Funds is a well known family of mutual funds that have been in business offering funds since 1931. The company in general has taken a long term, conservative approach to investing, making their funds attractive to many for retirement planning. If you are interesting in starting an American Funds retirement, this article will show you how.
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Instructions
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Call American Funds to get a list of financial advisors in your area. You will need a financial advisor at least to set up your American Funds account. American Funds feels that you should have the expertise of an advisor before making investments with your money. You are also charged a fee, called a front-end load, with each purchase of American Funds. This money is what pays the financial advisor who helps you with your investment. Since you are already paying the fee, you might as well have an advisor!
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Call the financial advisor and set up an appointment to meet with him or her to discuss investing in American Funds. Make sure to let the financial advisor know about your interest in American Funds, so that he/she will have information ready and available to you about this fund family.
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Do some research on your own about the American Funds family. You can go to their website, listed in the resources, and look at the different funds available, just to get an overview. You can look at each fund's historical performance, what stocks the fund consists of, what countries the investments are in, and other valuable information.
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Meet with the financial advisor, giving the advisor information about your retirement planning goals. With this information, the financial advisor will be able to recommend certain funds to you to start your retirement fund with American Funds. The advisor will have prospectuses on each fund that you should read before making any decision to invest your money.
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Decide on which funds you would like to invest in. American Funds has a new group of funds called the Target Date Retirement Series. You basically pick the year you will most likely retire closest to the nearest five-year date, and invest your money in this fund. For instance, if you will retire in 2041, you can pick the 2040 Retirement Fund. The fund changes its asset mix over time, going from a more aggressive approach of mostly higher risk stock funds to more bond and balanced funds as you approach retirement. This makes things easy for you, as you don't have to redo your portfolio over and over through the years as you get closer to retiring.
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If you don't wish to use the Retirement Funds, you can make a portfolio of the American Funds with a mix of stock and bond funds, based on your years to retirement and assessment of risk you wish to take on. The advisor can help you decide what funds will balance your retirement portfolio.
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Decide whether to invest in a regular account or an IRA or Roth IRA. You can invest in a regular account, and use it as a retirement account, especially if you make more money than is allowed for investing in any type of IRA. Otherwise, the financial advisor can set up your account as an actual IRA or Roth IRA account.
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Decide how much you will initially invest, and whether you will make monthly or yearly additional contributions. Just make sure if you invest in a Roth IRA, for instance, that you don't go over your yearly allowable investment.
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Set up the account with the financial advisor. Make sure to have the advisor set you up as an account where you can have direct access with American Funds. This way, you can make your own additional investments by phone or by setting up an online account through the website. Otherwise, you will only be able to go through your advisor to get information about your account and purchase and redeem shares.
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Tips & Warnings
You can always change your financial advisor later if you move out of the area, for instance.
If you are going to make your own subsequent investments by setting up your own online account through American Funds, make sure you have the knowledge to make wise decisions and you read each financial prospectus for each fund before you make the investment.
Be careful before investing in anything where your investment is not guaranteed. Although in general mutual funds are safer investments than actual single stocks, there is always the chance of losing a good bit or all of your investment. Be prepared to accept this loss before you put in your money.
American Funds do charge the front load sales fee, which takes away from the return on your investment, especially in early years. Many find it worth it to invest with a reputable, well established company with years of experience. However, there are other Fund families that do not charge these upfront fees, so always look into your options before making financial decisions.
