It’s Your Money Column – Start Planning for Retirement

Question: Interest rates are low and so is the stock market. I’m almost 50 and wonder if it’s too late to start on a plan for my retirement.

Answer: We are all frustrated with our choices right now. However, now is the best time to start no matter how little you’ve done so far. The October issue of Money Magazine describes a woman who realized when she was 54 that she needed to take charge of her finances for the rest of her life. She paid off her credit cards and started making contributions to retirement plans. Nineteen years later, she is satisfied with her financial planning progress.

One of the sources I like to turn for basic financial information is Jane Bryant Quinn’s book, "Making the Most of Your Money." She offers a most sensible, do-able philosophy for drawing up a plan for managing money. Regardless of whether you like to keep a close watch on your investments or would prefer to forget it all, try these ideas. They will help you acquire and hold onto your money.

• Keep your plan simple. Plain-vanilla choices work just fine.
• Diversify. Select some choices for the short-term and others for the long-term. Invest for changes in market conditions, in interest rates, in booming economic times and in tight economic times. This means putting money in 1) easy-to-reach choices such as money market mutual funds and short-term CDs; 2) in bonds (bond funds) for steady compounding of interest; 3) in stocks (stock funds) for growth; and 4) in your home as an inflation hedge.
• Invest regularly.
• Reinvest your dividends.
• Select choices that fit your needs. Don’t invest money that you’ll need next year in the stock market. Don’t put all of your retirement money in CDs.

Mutual funds with professional managers are good choices for many investors. The manager’s full-time job is to analyze the market and buy and sell stocks they think will perform well. Your cost for these management services when pooled with other investors is relatively low.

There is an enormous amount of easy-to-understand information about mutual funds. Publications such as Forbes, Money, Kiplinger’s Personal Finance, Business Week, Consumer Reports and the Wall Street Journal provide information about mutual funds including performance, average annual return, commissions and minimum initial investment.

Use safe savings choices (short-term CDs, money market mutual funds) as cash reserves to buffer against job loss or unexpected illness, to provide college tuition needed within four years or for a down payment on a house. Stocks are good choices for retirement funds.