Planning for retirement can sometimes feel overwhelming, but it's too important to put off. While each person's vision of retirement is unique, there are some best practices that can help you reach your retirement investments goals.
One of the best things you can do for your retirement is to start investing early. That’s because the sooner you begin, the longer your money has to grow. Even small contributions can grow into substantial amounts over time, thanks to
the power of compounding.
Diversify your investments
When building your portfolio consider spreading your investments across different asset classes (i.e., stocks, bonds, cash) and different investment types within asset classes. Each of these investments has a different level of risk and potential return and may react differently to changing market conditions. Diversification doesn’t guarantee against loss but it may lead to more attractive returns and less overall volatility.
Keep a long-term perspective
The financial markets move up and down – sometimes by a lot. It can be tempting to react to these fluctuations by changing your investment plan in terms of how much and where you invest. But, no one can consistently predict what the markets will do next and guessing wrong can dramatically impact your overall result.
Maximize your employer-sponsored retirement plan
An employer-sponsored plan may offer several important advantages, including automatic payroll deductions and pre-tax contributions. Some employers also offer matching contributions, which increases the amount you save each month and amplifies the effect of compounding.
Consider a target date fund
Some employer-sponsored plans include target date funds. These funds are a convenient way to hold a mix of stocks, bonds and cash that is managed for your desired retirement date. Be sure to research the current and projected risk exposure of the investment in choosing a target date fund.