7 Keys to Stress-Free Retirement Investing

Are you lying awake at night, wondering if your retirement money is properly invested? If so, it’s probably not much comfort to know that millions of other Americans are tossing and turning with the same worries.

Although retirement investing may seem complicated, it doesn’t have to be. As with just about anything in life, a little education can go a long way toward success.

Here are some ways to wring the most out of your retirement investing.

1. Get your full employer 401(k) match

Find out if your employer matches your 401(k) contributions. If so, ask about the maximum match the employer will make.

For example, if your employer matches contributions dollar for dollar up to 6% of your $4,000 monthly salary, you’ll get $240 free in your account for the first $240 you save — every month.

If you don’t take advantage of the employer match, you’re throwing away free money.

2. Bone up on investing

People trying to get the right retirement investment mix typically focus on three vehicles:

  • Stocks: Stocks are basically ownership in a company. They offer the most potential for reward, but they also present the greatest risk.
  • Bonds: While stocks are an “ownership” investment, bonds are “loanership.” You’re lending money to a company (corporate bonds), local government (municipal bonds) or Uncle Sam (Treasury bonds). Generally, bonds pay the holder (you) a fixed rate of interest, are due on a certain date and are backed by the company or government agency that issues them. That’s why they’re considered safer and more stable than stocks, albeit with a lower expected return.
  • Cash: These types of funds don’t earn much, but they are less risky than stocks or bonds.

3. Decide how much to put in each investment type

Here’s a simple rule of thumb often cited by Money Talks News founder Stacy Johnson: Subtract your age from 100. Use the figure you get as the maximum percentage of your savings you should have in stocks.

So, say you’re 20 years old. You could have up to 80% of your savings in stocks. But if you’re 60, keep it to 40%, because stocks are riskier and you’re close to retirement.

Once you’ve figured out how much to invest in stocks, divide the remaining part of your savings into other types of investments. For example, you could divide the money equally between an intermediate bond fund and a cash equivalent fund.

These percentages aren’t set in stone — they’re just a guide. Increase or decrease them to suit your needs and risk tolerance.

4. Keep expenses down

Investment fees can dig deep into your profits. Focus on keeping expenses super low.

Consider this example from “Of All the Fees You Pay, This Is the Worst”:

Say you have a 401(k) plan with a current balance of $25,000. Over the next 35 years, you earn an average return of 7% on that balance. Even if you don’t contribute another penny to your account during those 35 years, here’s how much money you’d have if your account fees were 0.5%, compared with fees of 1.5%:

Beginning balance Annual return Fees Balance in 35 years
$25,000 7% 0.5% $227,000
$25,000 7% 1.5% $163,000

So, the higher fee would cost you an additional $64,000 over 35 years.

5. Use dollar-cost averaging

No one expects amateurs to know when to buy and sell stocks. After all, most of the pros can’t even get that right.

Fortunately, there’s no need to worry about timing the stock market if you use a simple system called dollar-cost averaging. That entails making your investments in fixed amounts and at fixed intervals — for example, $100 every month.

This method gives you insurance against market dips because you’re buying more shares when they’re cheap and fewer shares when they’re expensive.

6. Choose index funds

There are two main types of mutual funds. How these funds are run affects their fees:

  • Actively managed mutual funds, or active funds, are run by financial professionals who decide which stocks or bonds to buy and sell within the fund. They aim to outperform stock market indices — and charge higher fees for their effort.
  • Passively managed mutual funds, or index funds, simply aim to mirror a stock market index such as the S&P 500. Fees are therefore minimal.

Past surveys have found that the average expense ratio of active funds is much higher than the expense ratio of index funds.

7. Consider target-date funds

This popular type of mutual fund is appealing because it takes a lot of the work out of investing. You just choose the date when you want to retire — 2030, for example. The fund is designed to do the rest, rebalancing your asset allocation over time based on your retirement date, or “target date.”

To learn more about the pros — and cons — of this type of investment, check out “5 Questions to Ask When Picking a Target-Date Fund.”

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
25 Things You Should Never Buy — and What to Buy Instead
25 Things You Should Never Buy — and What to Buy Instead

If you really want to save money, become a more intentional shopper.

8 Common and Costly Homebuying Myths
8 Common and Costly Homebuying Myths

Think you’re ready to buy a house? Don’t fall victim to these rookie mistakes.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

8 Surprising Things No One Tells You About Retirement
8 Surprising Things No One Tells You About Retirement

Knowing what to expect can help you prepare for — and adjust to — life in your golden years.

12 Products to Keep Your Car Clean and Organized
12 Products to Keep Your Car Clean and Organized

These items will help put your vehicular mess to rest — and each is available for less than $20 on Amazon.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

Eat This Food If You Want to Avoid Alzheimer’s Disease
Eat This Food If You Want to Avoid Alzheimer’s Disease

One type of food associated with the Mediterranean diet offers especially large benefits.

5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less
5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less

In this week’s podcast: tips on retiring overseas — from someone who’s been helping American expats for decades.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

15 Outrageously Overpriced Products — and How to Save on Them
15 Outrageously Overpriced Products — and How to Save on Them

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

Why Half of Retirees Now Owe Taxes on Social Security
Why Half of Retirees Now Owe Taxes on Social Security

Growing numbers of seniors are paying taxes on their Social Security benefits, but you might be able to avoid this fate.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.