Before you get started:
Making the most of your 401(k):
- Always pay down your credit card debt first.
- Build an emergency savings fund to cover
eight months of your monthly expenses.
- When choosing to start saving for your retirement OR
funding your child’s education, opt to save for your retirement.
- Sign up for automatic savings deposits for both your
emergency savings account and retirement fund.
- Savings and investments need time to grow. Focus on saving as much as you can each day.
Opening your IRA:
- If your employer matches your 401(k) contributions, that’s a retirement bonus. Make sure you invest enough to get the match!
- Diversify your 401(k) with “extended” or “total index” mutual funds.
- Don’t touch your 401(k) money until you reach retirement age – no loans or cash outs!
Diversify your investments:
- Open a Roth IRA if you’re eligible.
- If your income is too high to qualify for a Roth IRA, open a traditional IRA and start converting it to a Roth in 2010.
- If you cannot open a traditional IRA, then look into setting up a non-deductible IRA.
- If you are a stay-at-home mom, look into opening a spousal IRA.
- Fund your IRA to the annual maximum, which is currently $5,000 if you are under 50 and $6,000 if you are 50 or older.
These quick notes are presented in detail in Suze Orman’s book, Women & Money: Owning the Power to Control Your Destiny. Please refer to Pages 114-158 for details.
- If you have 10 years or longer until you need your money, consider a 90/10 allocation for your mutual funds and/or Exchange Traded Funds (ETFs) – 90 percent in an index fund tracking U.S. stocks, and 10 percent in an international fund.
- Don’t let your company’s stock account for more than 10 percent of your portfolio.
- Opt for ETFs, if offered, over mutual funds. An ETF is a basket of equities that tracks an established market index and generally offers lower fees than mutual funds.
- Choose no-load mutual funds if you want to invest in mutual funds.
- If retirement is more than 10 years away, consider purchasing high-yield, dividend-paying investments such as ETFs. Corporate bonds are also worth considering if you have larger sums of money.
- If retirement is less than 10 years away, begin moving your money to more stable-value funds.