Investing — Getting in the Water
Now I am not a financial planner. So the advice I am giving here is just my observation and how I would do things. I have talked to my wife about investments that we make and after a long explanation of why I am moving money to a specific mutual fund she looks at me, nods her head, and says, “that’s great honey.” This means she knows what I am saying is important but has no interest in understanding the ins and outs of how our money is invested. I cannot fault her for this since I am the same way with our monthly budget. This makes us a great team for managing our short term and long term finances. As I was writing yesterday’s post on the differences between men and women in the way they invest long term money, I thought about how I would advise my wife to invest retirement money if I was not around to do it for her. The only thing that came to mind was targeted retirement accounts.
A targeted retirement account is an ingenious development inside of the large mutual fund companies. It allows people who are not savvy investors to get into retirement investing without spending hours to educate themselve. Here is how it works:
1. You decide when you want to retire
2. You pick the closest rounded year to that date (i.e. 2042 = 2040)
3. You set up your account inside of an IRA, 401k. 403b, etc.
4. Keep putting money in year after year
That is it!! What happens in these accounts is they put together a mix of mutual funds based on how far off you are from retirement. So if you are 20 years away the mix is very aggressive and as you get closer to retirement the mix automatically gets more conservative. This way you never have to re-allocate the money so that you are not too heavily invested in one type of investment, because the administrators do it for you. You can find these types of accounts all over the place. If you are setting up an account for yourself I recommend Vanguard, Fidelity, and T.Rowe Price. These are the three low cost giants in the investing world and have a reputation for taking care of the customer. And, as always, the time to start investing is NOW!
