There are a number of financial rules of thumb that we repeat time and again on “The Money Show”, but one especially bears repeating, namely,
-- Your goal should be to save 20% or your gross yearly income towards retirement each year (15% if you’re in a job that guarantees you a pension). The reality for most people, however, is that in most (if not all) years, this goal is not attainable. Does this mean you shouldn’t bother saving for retirement at all?
-- Of course not. Nor does mean that you’re destined to be destitute once your reach retirement (or that you’ll have to keep working until age 100). Instead, it means that you should try and save as much as you possibly can. (And, remember, for most, in order to save enough (or as much as possible) towards retirement, that means you won’t be able to save anything – or, at most, very little – towards your kids’ college education. A harsh reality, yes – but again, for most, a reality nonetheless.)
-- How should you invest those monies? Most preferably, in a well diversified portfolio of mutual funds, first by maxing out your 401(k), 403(b) or other work offered retirement plan (or, if you’re self employed, by starting and investing in your own retirement plan – such as a SEP or Simple IRA.). Next, if you qualify (and still have money to save), investing in a Roth IRA. Finally, if you still have money to save, investing in mutual funds outside of a retirement plan or IRA, but which you “earmark” for retirement. These “earmarked” funds should compliment the diversification of funds you’ve invested in in your work offered retirement plan(s) and/or your IRA(s). (For a list of suggested mutual funds from which you can develop a well-diversified portfolio, see the BestMoneyinfo Mutual Fund list—you can find that site by clicking on the Best Money info icon on the 969WTKK.com home page. You can also find more information in general about saving for retirement on the BestMoneyinfo site, and in the BestMoneyinfo e-book.)