How to Maximize the Money You Save for Retirement

When you begin a savings plan for retirement, you need to make decisions about how to invest the money you save, based on your retirement goals, the length of time you have to achieve them, and the amount of money you can set aside.

Dollar Cost Averaging

Dollar cost averaging is a reliable way to make regular investments. You invest a fixed amount — whatever your budget allows — on a monthly basis. Over the long term, with dollar cost averaging, you can buy more shares at a lower price because the market is rising overall.

Reduce Brokerage Commissions

You may feel more comfortable using the services of a brokerage firm for transactions, in order to benefit from the knowledge and expertise of a broker. However, if you want to minimize brokerage fees and are willing to take on the task of researching investments yourself, you can reduce the brokerage commissions you pay through the following methods:

1. Buy direct: Some companies are willing to sell shares directly to investors. Many also allow the investor to participate in the company’s dividend reinvestment plan (DRIP). To check for companies that allow for direct investments, contact The Moneypaper or Netstock Direct.
2. Pursue no-load mutual funds: A no-load fund is one that doesn’t add charges, either when you buy or when you sell. You can invest a small or large amount of money on a regular basis even if your investment dollars only buy fractional shares. Many of these no-load mutual funds work with automatic deductions from your bank account.

Use Qualified Financial Planners

You may want to work with a professional financial planner who can help you analyze your retirement goals and strategies and recommend the balance in your investment portfolio, or collection of investments, that works best for you.

Financial planners are trained professionals. Get recommendations from your accountant or tax preparer or by consulting a directory of these professionals in your area. Certified financial planners (CFPs) have taken a series of courses, passed a six-part exam, and have a minimum of three years of experience.

There are no set fees for financial planners; some work for a fee, others work on commissions, and some are paid with a combination of the two methods. If you decide to use a financial planner, interview at least three candidates and ask each about their fees and their experience. Ask also to see their resumes and a list of references.

Retirement Investment Tips

Your retirement will be more comfortable and worry-free when you take advantage of the following strategies:

1. Contribute to your retirement plan at work to the maximum degree possible: Take advantage of all matching funds your employer will put in your 401(k).
2. Keep up with the changes and trends in Social Security: Know how your Social Security benefit fits into your retirement plans.
3. Save and invest regularly for your own retirement: Small but regular savings are easier on your budget than large lump sums.
4. Start now: All the data show that when you start saving for retirement early on, your savings and investments can provide a comfortable retirement and financial security that you can’t achieve when you start later. Remember the miracle of compound interest.
5. Diversify your investments: Don’t put your retirement nest egg into one basket. Investing in a mutual fund provides some kind of diversity. Include a variable annuity, additional mutual funds, a Roth IRA, or other instruments in your retirement portfolio.
6. Do something: No decision is foolproof, but take that first step anyway. If you aren’t happy with the results over a period of time, don’t be afraid to make a change.