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May 2012
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Saving for Retirement
It's never too early to start saving.

Many people put off saving for retirement because they don’t realize how many investment opportunities are available. Yet starting young gives you more time to grow your savings through investments such as Individual Retirement Accounts (IRAs) and 401K savings plans, mutual funds, Certificates of Deposit (CDs) and even purchasing real estate.
When to start saving
Your approach toward saving for retirement will change at different points in your life. Young adults can afford to take chances with investments that have higher risk because they have time to wait out the inevitable dips in the market. As you get older, your investment strategy will move toward lower risks with a goal of maintaining the nest egg you have accumulated.

How much to save
Whether you use online retirement planning calculators or enlist the help of a financial advisor, you must begin by considering some important questions: What is your life expectancy? What kind of lifestyle do you want during retirement? Will you travel, buy a boat or have other large expenses? Be generous in your financial goals to avoid outliving your savings after you have retired.

Mutual funds vs. IRA or 401K plans
For new investors, terms like mutual funds, IRA and 401K can be confusing. There is an important distinction among these terms. Mutual funds are a type of investment package. They are made up of a combination of stocks and bonds designed to meet a specific goal (level of risk vs. yield). On the other hand, IRA and 401K plans are types of accounts. They can be used to invest in mutual funds, stocks, bonds, CDs and other options.

Employer-based retirement plans
Many employers offer retirement savings options, such as 401K plans or pension programs. Enrollment is often a simple process and in some cases employers will match the contributions you make to your retirement saving plan. If you leave the company, you can cash out or roll the money from your 401K into a plan at your new job or into a personal IRA.

Personal saving plans
Regardless of employment, you can opt to open an IRA through your bank. IRAs provide tax advantages in addition to retirement savings. The type of IRA you choose (Roth or traditional) and the level of risk for your investment will depend on your personal needs.

Other investments
For no-risk savings, older adults often opt to put money into CDs for a set length of time. CDs either pay a fixed or variable rate of interest and are FDIC insured. Real estate is another way to invest in the future. Retirees who have built equity in a family home often downsize later in life.

Young adults may not be thinking about retirement yet, but it’s never too soon to start saving for the future. Remember, the earlier you begin saving, the longer you will have time for your money to grow.


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