Retirement - Getting Started

Saving for retirement isn't glamorous or immediately rewarding, but it's something we all must do, whether just starting a career or edging closer to retirement. You may get a little help from Social Security payments or a company pension plan, but it's up to you to sock away as much as you can now to pay for your retirement years later.


Get started now and focus on the long term. The earlier you get started, the
more time your investments will have to grow. You also have the benefit of
being able to ride out market fluctuations if you keep your eye on your
long-term goal. Establishing an automatic investment plan is a great way to "set
it and forget it."

Take advantage of every opportunity. It's likely that your first and primary
exposure to retirement investing may be through an employer-sponsored
retirement plan, such as a 401(k). Invest as much as you can and take
advantage of matching contributions from your employer. Be sure you also
open an IRA so you can put even more money away on a tax-deferred or
tax-free basis.

Use mutual funds. Mutual funds are a good option for retirement because they
are professionally managed and diversified. You can use several funds to
diversify even further and ensure you're not keeping all of your eggs in one
basket.

Investing little by little over time can make a big difference. Make the commitment to yourself so you can help make your retirement dreams a reality!

Why Invest in Mutual Funds?

A mutual fund pools the money of many investors to invest in a variety of different securities. Investments may be in stocks, bonds, money market securities or some combination of these. The securities are professionally managed on behalf of the investors, and each investor holds a pro rata share of the portfolio – entitled to any profits when the securities are sold, but subject to any losses in value as well.

More than 88 million people, or almost half of all households in America , invest in mutual funds, representing trillions of dollars in investments. Mutual funds have become the investment choice to reach lifetime goals.

The reasons:

So where can you invest your money? The answer for more and more Americans is to invest in mutual funds.

Professional money management. Mutual funds provide the benefit of having someone else manage your investments and take care of the recordkeeping.

Diversification. A mutual fund, by its very nature, is diversified – its assets are invested in many different securities. Beyond that, there are many different types of mutual funds with different objectives and levels of growth potential, furthering your opportunity to diversify.

Affordability. Minimum investment requirements on many funds are low enough that even the smallest investor can get started in mutual funds.

Liquidity. Investors can readily redeem their shares, although some funds may charge redemption fees. Types of Mutual Funds This section describes the characteristics, such as investment objective and potential for volatility, of various categories of funds. The descriptions are organized by the securities purchased by each fund: stocks, bonds, money market securities, or a combination of these. Because mutual funds have specific investment objectives such as growth of capital, safety of principal, current income or tax-exempt income, you can select one fund or any number of different funds to help you meet your specific goals. In general, mutual funds fall into these categories: Stock or Equity Funds invest in shares of common stocks. Bond or Fixed-Income Funds invest in government or corporate securities to generate income. Asset Allocation Funds invest in a combination of stocks, bonds and money market securities. Money Market Funds for high stability of principal, liquidity and income. Stock or Equity Funds Growth Funds What they invest in: Generally invest in stocks for growth rather than current income. Suitable for: Growth-oriented investors who are able to assume risk or who are dependent on maximizing current income from their investments. Value Funds What they invest in: Generally invest in fundamentally strong businesses whose stocks appear to be selling at attractive prices. Suitable for: Investors who seek the possibility of long-term capital appreciation with varying levels of dividend income. Blend Funds What they invest in: Both growth stocks and value stocks. Suitable for: Investors who want the potential to build wealth over time while seeking investments that perform well when either growth or value stocks are in favor. International Funds What they invest in: Securities of international markets. Suitable for: While international funds offer opportunities for growth and diversification, these funds do carry some additional risks over domestic funds and should be carefully evaluated and selected according to the investor's objectives, timeframe and risk. They are not suitable for investors whose goal is to conserve their principal or maximize current income. Specialty/Sector Funds What they invest in: Securities of a specific industry or sector of the economy such as health care, technology, leisure, utilities or precious metals. Suitable for: Investors seeking to invest in a particular industry. They are not suitable for investors whose goal is to conserve their principal or maximize current income. Bond or Fixed-Income Funds Taxable Bond Funds U.S. government and government agency bonds, mortgage-backed and asset-backed bonds or bonds issued by corporations. Suitable for: Investors who want to maximize current income and who can assume a degree of capital risk in order to do so. When interest rates rise, the market price of bonds decline and so will the value of the funds' investments. Tax-Free Bond Funds What they invest in: Bonds issued by state and local governments and other entities to raise monies for public works and improvements. Suitable for: Investors seeking income dividends that are free from federal taxes and, in some cases, state and local taxes. When interest rates rise, the market price of bonds declines and so will the value of the funds' investments.   Asset Allocation Funds What they invest in: A variable mix of stocks, bonds and money market securities. Some use a "fund-of-funds" structure and invest in other mutual funds rather than individual securities. Suitable for: Investors seeking the advantage of investing in a single portfolio with broad diversification.   Money Market Funds What they invest in: Taxable money market funds invest in high-quality, short-term U.S. government securities and corporate money market securities. Tax-free money market funds invest in high-quality, short-term securities that are exempt from federal taxes and, in some cases, state and local taxes. Suitable for: Money market funds are suitable for conservative investors who want high stability of principal and moderate current income with immediate liquidity.

How Much Income Can I Expect to Receive From Safe Retirement Investment?

How Much Income Can I Expect to Receive From Safe Investment?
A Historical Perspective on Safe Investment Returns
By Dana Anspach, About.com

Safe Investments Produce Some Investment Income: But It Varies From Year to Year

In addition to capital preservation, when you make safe investments, you also receive interest income.
How much income can you receive?
In 1981 a safe investment (such as a certificate of deposit) yielded 17.2%. For every $100,000 you had invested, you would have received $17,200 in interest income.
In 2003 that same investment yielded 1.2%, or $1,200 of interest income, per year, on every $100,000 invested.
If you retired in 1981, and only invested in safe, interest bearing accounts, you would have found it difficult to maintain your standard of living.

Below is a table that shows you the approximate amount of interest income you would have received each year since 1973 for every $100,000 invested.

Safe Investment Rates

Historical 1 Month CD Returns
Year	Return	Annual Income Per $100k
1973	8.4%	$8,400
1974	11.0%	$11,000
1975	6.6%	$6,600
1976	5.3%	$5,300
1977	5.6%	$5,600
1978	8.1%	$8,100
1979	11.5%	$11,500
1980	13.6%	$13,600
1981	17.2%	$17,200
1982	13.0%	$13,000
1983	9.4%	$9,400
1984	10.9%	$10,900
1985	8.4%	$8,400
1986	6.9%	$6,900
1987	7.2%	$7,200
1988	7.9%	$7,900
1989	9.7%	$9,700
1990	8.7%	$8,700
1991	6.3%	$6,300
1992	3.9%	$3,900
1993	3.2%	$3,200
1994	4.4%	$4,400
1995	6.2%	$6,200
1996	5.6%	$5,600
1997	5.8%	$5,800
1998	5.7%	$5,700
1999	5.4%	$5,400
2000	6.6%	$6,600
2001	4.2%	$4,200
2002	1.8%	$1,800
2003	1.2%	$1,200
2004	1.4%	$1,400
2005	3.2%	$3,260
2006	5.1%	$5,150
2007	5.4%	$5,450
2008	3.1%	$3,140