Affording retirement Getting started Determining how much savings or annual income you will need to fund your retirement can be diffi cult to pinpoint, but it is a critical component of defining your retirement lifestyle and goals. How much money will you need? Unfortunately, there are as many answers as there are dreams for retirement. The actual dollar amount depends largely on what you plan to do: switch careers, travel, start a new business. The possibilities are endless, so it's important that you start considering your options now and set some realistic financial goals for yourself. Getting started To get started you need to ask yourself four basic questions:   What are my investment goals? How long do I have to invest? How long do I expect to live in retirement? How much risk am I willing to take? As mentioned previously, your investment goals will depend on how you plan to spend your retirement. If you don't have a clear idea just yet, consider your current lifestyle and your dreams. This will help you formulate an investment goal, which you can adjust as retirement age approaches. Next, determine how long it will be before you retire — your time horizon. Generally speaking, the longer your time horizon, the more risk you may be able to accept in exchange for potentially higher returns. If your time horizon is relatively short, you may not want to accept as much risk and may prefer a more stable investment. Determining your risk tolerance After your goals and time horizon are determined, you need to analyze your attitude about risk. Can you accept a lot of fluctuation in the value of your investment for potentially higher returns? If so, you may want to consider stocks. However, if you feel anxious when the markets begin to fall, you may want to consider fixed-income investments. Or, choose a balanced approach that attempts to cover for a variety of market conditions. Remember, taking the "safest" route with your money may not be safe at all. Perhaps the riskiest thing you could do is to not invest your money at all. That's because you expose your money to the risk of inflation, the insidious erosion of your money's purchasing power due to the rise in the prices of goods and services. Inflation has varied historically. From 1969 to 1998, inflation averaged 5.3% a year. At that rate, prices doubled every 13 years. Longer term inflation has been a bit lower, averaging 3.42% per year from 1914-2007 according to Inflationdata.com. Inflation can pose a big problem in retirement savings. In order to stay ahead of inflation, you often need to take some risk with your money. Funding your retirement Because it may be hard to imagine yourself retired, it may be even harder to think about where the money for retirement will come from. Traditional methods for funding retirement, such as Social Security and other retirement benefits, may not meet all your financial needs — especially when people are living longer and retiring at an earlier age. One solution may be to rely more on retirement savings programs that you control to fund an active and comfortable retirement. Your employer may make this responsibility easier for you by offering a retirement savings plan. An employer-sponsored, tax-deferred plan is one of the most powerful tools available today. Depending on the company and the options available, it enables you to decide whether to participate, how much money goes in, how it's invested, and how long it stays invested. You can select investments that match your financial objectives and reflect your comfort with risk. Further, should you leave your employer, your contributions plus any earnings can be transfered to a new employer plan, an individual retirement account, or left in the current plan. And if you have remained with your employer long enough to fully qualify, you could also get employer contributions plus any earnings. Speak to your benefits department to find out more about your options. Sticking to your strategy Whichever method you choose to fund your retirement, it's generally best to stick with your strategy — even if the markets go down. Unless your life situation changes, you will likely be better off sticking with your strategy than moving in and out of investments in pursuit of better returns. This doesn't mean, however, that you should set your investment strategy in stone. You should regularly evaluate your investment decisions and adjust them accordingly as your needs change and your time horizon grows shorter. If you would like a referral to a financial professional in your area who can help with investment decisions, Russell can help. Please submit a request. Fund objectives, risks, charges, and expenses should be carefully considered before investing. A prospectus containing this and other important information can be obtained by calling (866) 676-7680 or by visiting this page on russell.com. Please read the prospectus carefully before investing. Copyright © Russell Investments 2005. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an as is basis without warranty. Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Inflation may not maintain an even rate and may be more or less than the percentage indicated. Although stocks have historically outperformed bonds, they also have historically been more volatile. Investors should carefully consider their ability to invest during volatile periods in the market. Securities products and services offered through Russell Financial Services, Inc., member FINRA, part of Russell Investments. For information on the Financial Industry Regulatory Authority, go to www.finra.org. First used: May 2008 RFD 08-0292			Learn the benefits of Russell LifePoints Funds which can complete your balanced investment portfolio with just one decision.     RELATED Articles Understanding Compounding Saving for Retirement Tax Strategies Developing Your Investment Strategy Planning for Retirement Checklist Printer friendly version of this page Send feedback or comments Site Search

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