Everyone wants a comfortable retirement, which means putting money you have saved to work for you in a smart way.
TODAY financial editor Jean Chatzky has six areas to focus on when it comes to investing for tomorrow and position yourself for a secure financial future. Thursday on TODAY, Chatzky shared tips in all six areas and stressed moving your money to safety, rebalancing your investments annually, and paying yourself first by making sure you have enough saved.
1. Retirement accounts
Company option: If your company offers a specific retirement plan or 401 (k), that’s a good place to start saving for down the road.
MyRA program: If a company retirement plan is not offered, one option is a MyRA, or My Retirement Account, an account developed by the U.S. Department of the Treasury. It’s a Roth IRA, which only invests in treasury bonds, and there are no fees, no minimum balance and no contribution requirements.
IRAs: Individual Retirement Accounts offer another vehicle for saving.
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2. Know what should be saved
Save what you need for the next 3 years: Any money you need for things like paying for college, a down payment on a house or living expenses that isn’t covered by Social Security should not be in the stock market because it’s too risky and a downturn in the market could wipe out money you cannot afford to lose.
If safe money is in stock markets, sell: Pull your safe money out of the stock market and put it in things like savings accounts, money market funds, CDs and short-term government bond funds. Move that money to safety even if it means taking a small loss because keeping it in the market could mean much bigger losses.
3. Calculate asset allocation
Investment mix: Determine how your money is split between stocks, fixed income (or bonds) and cash.
Percentage should go down as you age: You want to reduce the percentage of your money tied up in stocks as you age so that it lessens as you get closer to retirement. If you subtract your age from 100, that’s generally the percentage you want in stocks, with the rest in bonds and cash.
Rebalance once a year: Take the time to balance out your portfolio once a year and get your asset allocation to where it should be.