It's Not Rocket Science: Save for Your Future


Jobs reports blah blah, foreign markets blah blah, commodity prices blah blah, municipal bonds blah blah.

If that's how you see investing news, don't fret.

Wading into the sea of investments and markets information can be murky.

Many beginning investors don't need to understand all the complicated details to decide how to save for the future.

For many people, the topic of the stock market only flies on their radar upon receipt of 401(k) or IRA statements. If that's the case, you need only be concerned with long-term market performance.

What that means: The short-term ups and downs of individual funds or asset types shouldn't drive the decisions you make with your retirement savings.

"Time is a very important consideration for investors," says JJ Montanaro, a certified financial planner professional with USAA. "Your investments should align with the timeframe of the goals for which you are investing.

"A 401(k) is primarily for retirement," Montanaro adds. "If you have 30 or 40 years until retirement, you probably shouldn't make wholesale changes in your portfolio based on what may or may not happen over the next six months or a year."

Instead of spending hours deciphering blips in the S&P 500, focus on developing good habits: Save early, and save often. At this stage, your best shot at helping "future you" have money in the bank is to follow these suggestions:

  • Set aside at least 10 percent of every paycheck in a 401(k) or IRA.
  • Take advantage of an employer match if it's available. (The employer is giving you extra money!)
  • Make sure to have three to six months' worth of expenses in an easily accessible place, such as a traditional savings account.

Obviously, you won't be able to avoid terms like allocation and diversification when trying to make the most of your retirement savings. But because the goal is to trend upward over the course of decades, good savings habits are generally more helpful than stressing over the details over which day traders lose sleep.

Don't tune out market information entirely, Montanaro says. Reading reports and commentary and listening to professionals can be an important component of your education as an investor.

"Investing is like just about any activity: With time, education and experience you will improve," Montanaro says.

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