Keys to Retirement Success

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I’d like to share something with you about your retirement plan you’ve probably never been told. Truth is, you don’t have to be an expert investor to get the most out of your retirement plan. You can’t control the markets or how your investments perform. But you can control the two biggest drivers of retirement success – how much you contribute and how you spread your money among types of investments. It’s like getting in shape. You simply need to pick up the pace of your contributions and find the right balance of investments.

Pick Up Your Pace

No matter how far off your goal is, one thing’s for sure, it will never get any closer until you start moving towards it. Saving for retirement’s the same way. You have to start picking up the pace now. Waiting even 5 years can have a big impact on your end result. The number one factor in your success is the amount you choose to contribute. You should aim to save at least 6% of your pre-tax salary. If that’s too much right now and you have many years until retirement, start lower and steadily increase it over time. And if your employer matches your contribution, be sure to contribute enough to get it all. It’s free money!

Little increases now can pay big dividends down the line. So let’s say you make $30,000 a year and contribute 2% of your salary to your retirement plan. If you increase your contribution by just 1% a year for 4 years, then your contribution will reach 6%. And when you retire after 30 years (assuming a 7% rate of return), your retirement plan assets could be doubled, which means you could have twice as much money each month in retirement.

So seeing these big results requires big sacrifices now -- right? Wrong. An extra $50 a paycheck now can mean an extra $1,200 a month in retirement.* And finding that extra money is easier than you think. You can cut out a latte today. Bring a lunch tomorrow. And each time you get a raise, increase your contributions. You probably won’t miss the money, but you’ll appreciate the difference it makes at retirement.

Well now you know that how much you contribute is the number one factor in your success, let’s get started. Increase your contribution rate online. Or call a retirement specialist.

*Assumes 38 years of saving, 7% average annual investment return, 20 years in retirement, a 50% employer match, and no increases in contribution amounts.

Find Your Balance

When you exercise, stretching and improving your balance can help you stay in shape. Turns out your retirement plan can benefit from a little balance too. It’s called asset allocation. By having the right mix of investments, you have the potential to achieve your goals while helping manage your risk.

There are three basic types of investments. Cash and stable value investments help keep your original investments safe, but have limited potential for growth. When you buy a bond, you’re lending money to a corporation or government entity. In return, you receive regular interest payments until the money is repaid. Bonds can provide a relatively stable form of regular income, but typically offer only moderate growth.

Buying stocks gives you part ownership in companies. Your goal is that the company’s value will increase over time, and your investment will be worth more than when you bought it. Historically stocks have produced higher returns than either cash or bonds, but they can also involve greater downside risk. The further away your retirement, the more stocks you may want to hold because you’ll have time to benefit from long-term gains and recover any short-term losses. Find your balance by deciding the level of risk you’re comfortable with based on your retirement time horizon. Then choose investments that match your level of risk and timeframe. Remember, not having enough money for a comfortable retirement can be the greatest risk of all.

Just as balancing requires constantly making small adjustments to keep from falling, balancing your retirement plan requires regular adjustments too. At least once a year, or more, if there’s been unusual market activity, you should check your retirement plan’s asset allocation and make sure it’s still in balance.

For example, if you split your assets 70% in stock mutual funds and 30% in bond funds, and the stock market performed particularly well, the value of your stock funds might grow to represent 80% of your investment. To keep your balance, you’d want to shift 10% of your stock funds back into bond funds to return to your original asset allocation.

Now it’s time to find your balance. Take a look at your asset allocation online or call a retirement specialist now.

Tools for Retirement Success

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