What You Need to Know to Set Up Your Retirement Fund

Whether you have 5 or 55 years until retirement, you should be actively contributing to your retirement fund. These investment vehicles may seem difficult to unravel and even a little scary. 

With a bit of basic education about retirement planning, you too can feel confident setting up your personal or employer-sponsored retirement fund.

Maximize Employer Match

Most employers are concerned about their staff and want to provide education about retirement planning. They also help support retirement dreams by offering a company match for employees who actively participate in the 401(k) or other employer-sponsored savings plan. The goal for employee participation is 90% of eligible employees. As of January 2019, about 85% of employees actively contributed to their employer-sponsored retirement plan.

Recognize Investment Options

Retirement plans are designed for systematic growth that will position investors for income generation during their post-retirement years. Employer-sponsored plans will consist of suitable investment vehicles.

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If you are planning to invest on your own, there are a few types of investment options that you should be familiar with:

  • Stocks
  • Bonds
  • Money Markets
  • Mutual Funds
  • Currencies
  • Commodities

Investment Vehicles

The types of investments listed above represent just a few of the products available to investors. Not all will be suitable for retirement planning, so you will need to differentiate between investing and retirement planning. Retirement savings plans should consist of a balanced portfolio that takes into account your age, risk tolerance, and amount of time you have remaining before retirement.

Plan for Retirement Success

Funding your retirement savings requires more than money. You must also have a basic understanding of investment vehicles or options. We have described a few here, and there are many more to consider. Once you have decided which types of accounts and investments are most appealing and suitable, you must be willing to stick with your plan. Consistently contributing to your retirement plan is the key to success.

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What are your retirement plans? Do you want to travel the world or stay local and enjoy family? Most investment companies offer free retirement calculators and other interactive investment tools. Use these to your advantage and discover how much you will actually need to put away now to make your retirement dreams a reality. Make adjustments early so you will not have any unpleasant surprises as you near retirement age.

Bank Products

Your local bank offers investment options for your various needs. If you feel more comfortable working with a personal banker, you can discuss your retirement plans at a local branch. Your banker or financial advisor can also assist with education savings plans, annuities and other insurance products, and certificates of deposit. Each of these investment vehicles is important for your overall financial health.

Keeping Your Money Safe

Investors who have a low tolerance for risk are often at a disadvantage because they are uncomfortable with average market fluctuations. If you are this type of investor, your instinct may tell you to keep your money in a stable value fund, or money market account. While you will probably never lose money in these accounts that stay at about $1 per share, they are not suitable if you have more than one year until retirement.

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Money market accounts will not keep up with inflation over time, and you will end up outliving your retirement savings. They are designed as supplemental accounts and are often attached to on-demand accounts, such as personal or business checking accounts.

Stable value funds are also typically used as a holding account for new or unapplied funds in an employer-sponsored retirement plan. Here, they are used as the default vehicle until the user determines where to invest.

Overall, you have all the information you need to set up your retirement fund. There are a plethora of online resources for investors. As long as you are realistic about your retirement goals and are committed to consistently saving, you will be in a healthy financial position. Consider your options carefully and talk with the experts when you are unsure about your choices.

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