Financial Health

Saving for retirement.

Everyone knows that Americans, as a nation, are spending too much and saving too little. This can be seen in pension fund shortfalls, consumer debt mountains, and an ever-expanding trade deficit.

However, there are not a lot of people who lose sleep at night because of these long-term national problems. What matters to most people is their personal finances, and the only question most of us need to ask ourselves is, am I saving enough? Our savings are what will determine the type of retirement we ultimately end up with. No one wants to end up in retirement, after a lifetime of hard work, struggling to make ends meet. And the consequence of the national problems for most of us is that, put bluntly, we are not saving enough.

So how can we avoid such a scenario? Well the most common advice given to anyone is start saving early. Because of compound interest, money saved in your twenties is probably worth about four times as much as money saved in your forties. That's a pretty good reason to start saving early. The historical average return on stocks has been somewhere close to 11%. This would be a great rate to count on but most investment managers would probably predict a more cautious rate of return. There are many options open to investors today that can give very attractive returns on a fairly low risk basis. One option is an actively managed mutual fund. These pools are managed by some of the best traders available and they will put a lot of effort into getting you the best returns for your money, at the lowest risk. They will charge significant fees for this but one would hope their results would justify it. On the other hand there are index linked tracker funds that mirror the market and count on their historical upward trends to continue.

What you are likely to want is a cocktail of different funds in different markets, all working to make sure whatever you save today, will be enough to keep you comfortable through your retirement.