Part 20 (1/2)

Retire for individuals is relatively new A generation ago, most people had defined pensions, which ot a check every month It was someone else's job to invest that money Today, you're responsible, like it or not

Retirement, 1-2-3

1 Invest automatically Invest 10 percent of your income into a retirement plan, such as a 401(k) or Roth IRA

2 Diversify Invest all the et-date retirement fund closest to when you'll retire

3 Hold on Never touch the”Entire books are written on retire How can it be this simple?”

It can For the vast majority of people, this sih” to ensure you're saving for a respectable retire the way, and probably should But not doing these steps, or ones very siolden years

Just because it's simple, doesn't mean it's unsophisticated And it certainly doesn't , the et, the oing to get rich off you

Getting started with retire your hun up for a retireht have enrolled you automatically If you already have a retire your contributions and allocations

How big of a retire do you need to build? Whatever number you come up with is siless

You could assume you'll spend the same amount of money you do now, adjusted for inflation But how reasonable is that, especially if you're in the wildly expensive raising-a-fae of life?

Expenses in retire one, and perhaps you paid off the hoht need , recreation, and medical care

Online calculators are a help in deter what you need because the math is complicated to do by hand The more detailed-and unfortunately, tedious-the online questionnaire, the better your estimate will be Exa:Fidelitycom/myPlan3trowepriceco/ballparkaarporg Financial software, such as Quicken, also has retireure you couess The best professional financial planners can only speculate about what the total dollar figure for your nest egg should be and what you need to be saving along the way to accuure That's because of the unknowable assu you'll live, to inflation rates, to what return your investments will earn But an inforive you a ballpark figure, so you know you're striving for either 750,000 in retires or 4 million

Focus on what you can control; that is, stashi+ng awayyour hands off it The retiree number But the only way to eat an elephant is one bite at a time

1 Invest Auto retirement contributions automatic is fundareat because the et it The other good way is to fund a retirement account with auto account

Here are so for retirement:Why should I save for retiree where you don't want to work anymore, or physically (or s earmarked for your retirement years, you'll be destitute or a burden to family members ill have to care for you

Whyway off for many people That makes it extremely difficult to make it a priority when the bustle of everyday life puts numerous demands on our money With most people, if they have to write a check every et in the way and they'll skip some months, orthrough a regular paycheck deduction or a regular draft fro account, you're ularly

Why invest at least 10 percent? Besides being a nice, round, easy-to-reh to start you on the path toward building retirement wealth It also works ith the typical 401(k) plan, in which an employer matches the first 6 percent of whatever you contribute You'll be guaranteed to capture all of that free ood start toward 15 percent, a contribution goal est

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One painless way to get to 15 percent is to raise your contributions by 1 percent or 2 percent every tiet a pay raise That way, you won't notice a reduction in your take-home pay

Why use a retireular mutual funds for retirement But when you use the umbrella of a retirement plan, you can shi+eld the money from taxes, either now or later If you pay less tax, you'll have s vehicle should I use? This is where ed down First, know that it's less important which retirement plan you choose It's more important that you automatically contribute to a retire are brief descriptions of some of your choices:401(k) and 403(b) If you qualify for a 401(k) retirement plan at work that matches your contributions, join the plan and contribute 10 percent of your income This is the easiest solution The 403(b) and 457 plans are si names because they refer to part of the federal tax code Considering it involves the IRS, what else would it be except corow tax free The pain of contributing is reduced because less tax100 to your 401(k) reduces your net pay by less than 100 The exact amount depends on your income-tax bracket and several other factors With a 401(k), Uncle Saets his cut when you withdraw the ular income tax rate, whatever it is at that time

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If your employer matches your contributions, don't miss out on that free money! I've alluded to this previously, but it's worth e Often an employer will contribute 3 percent of your pay if you contribute 6 percent This is a fantastic deal That's a 50 percent guaranteed return on your et that anywhere else Even if you dislike your eet the fullcontribution

Roth IRA For those who don't have a 401(k) at work, open a Roth IRA and sign up to ular contributions With a Roth, you contribute et no up-front tax break The benefit comes when you retire That's when you can withdraw all the invests contributed over the years, tax free That's a huge advantage The downsides are that higher-income people don't qualify to use a Roth and, if you do qualify, you can't stash away a ton of e 50 or older) The earnings lile and 176,000 if you're ross incoer than those limits, you can't use a Roth And if your incoht be allowed to make only a partial contribution of somewhat less than 5,000 Find updated liross incoov

You can open a Roth IRA with many investment companies Look for a place where you can et-date retire your investuard at vanguardcom, T Rowe Price at epricecoain, there area planner or broker and using a different family of mutual funds But they probably will be h, built-in expenses

What if I'm self-employed? If you're self-employed, you probably have an accountant-or you should Unless you'll ies, taxes are often overly complicated for busy business owners So, when it co for retirement, seek advice from your accountant He or she will explain such retirement options as the individual 401(k), the SEP, and the SIMPLE IRA

2 Diversify

So, once you have decided on a retirement account and resolved to invest automatically, which individual investments should you choose? You've probably heard, ”Don't put all your eggs in one basket” You ht have heard of ”diversification” They both -spread your money around to different types of investments Good diversification has been shown to reduce volatility and iain, this is where people get bogged down and confused So, here's soh” for et-date” fund closest to when you'll retire