Retirement Investment Strategies

Once you have some idea of what your retirement needs might be as well as the retirement savings options available to you, you can start outlining your retirement plan investment strategy. You'll need to carefully consider:

• The amount of time you have left until retirement.
• The level of risk you are comfortable with.
• The amount of money available to invest for retirement.
• The amount of money available for other goals.
• How much time and effort do you want to put forth to manage your investments?

The objective is to develop a retirement strategy that fits both your personal investment philosophy and your stage of life. The following "Model Portfolios", reproduced from the MFEA (Mutual Fund Education Alliance), provide a general framework to begin your planning.

• By starting early, you can save toward retirement with only a small percentage of your annual income. This is important when there are children to support and college educations to fund.


• With time on your side, you can build a healthy retirement portfolio and benefits from compounding interest, dividend reinvestment and capital growth. You also can afford to be quite aggressive, since a shorter-term downturn should make little difference when you invest for a period of up to 20 years.


• Begin an automatic investment plan.


• Invest in your company-sponsored retirement plan and contribute annually to an IRA.

• As retirement approaches, you'll want to maintain an aggressive element to your portfolio while gradually repositioning some of your money in less risky income and capital preservation-oriented funds.


• Maximize contributions to your company retirement plan and IRA.


• Continue an automatic investment plan.

• Once you are near or in retirement, you want to protect what you've accumulated wOith more moderate and conservative investments. You also want to position your money so that it can begin to provide income on a regular basis. However, you'll need to maintain some investments for long-term growth, just in case retirement turns out to be more expensive than you ever suspected or inflation heats up.


• Continue contributions to your retirement plan until age 70 -1/2.


• Ask your tax adviser how much to begin withdrawing from your savings and retirement plan.

Description of Investment Categories:

Maximum Growth
Maximum Growth investments offer the highest potential for capital growth, income, or both. They are often volatile and involve greater risk, but with the higher likelihood of providing above average returns. This includes aggressive growth funds, growth funds, small capitalization stock funds ($100 million or less), and international funds specialty/sector funds.

Growth & Income
Growth and Income investments are generally high quality investments offering reasonably good potential for capital growth, income, or both. They also offer some degree of safety. These include growth and income funds, balanced equity/income funds, international funds, and municipal bond funds.

Conservative
Conservative investments generally offer a high degree of safety and stability, with a minimum amount of risk. These include money market funds, U.S. government money market funds, fixed income funds, and tax-exempt funds.

The danger of being too conservative.
As retirement approaches, many people begin shifting a larger percentage of their assets into more conservative investments. Once you are retired, you're more dependent on your investments for steady income. You need to reduce downside risk. Unfortunately, some people become overly cautious, investing too much of their money in fixed-income investments. If their money isn't growing fast enough to offset the effects of inflation, they're actually losing purchasing power every year.