Intimidated by saving and investing for retirement? Knowing these basics will give you confidence to take the first steps in building your retirement portfolio.           

If you’ve ever felt overwhelmed about retirement planning, you’re not alone. There’s a lot to consider—your current needs as well as future ones, how much to invest and where to invest. However, don’t be dismayed. Approach retirement planning with the mindset that you don’t need to know everything right away. There are people and resources to help you learn. Over time, you’ll build knowledge and gain confidence.

Let’s take a look at some of the basics of building a retirement portfolio.

What’s a retirement portfolio?

A retirement portfolio encompasses all of your retirement savings.

Each person’s portfolio will be different. For example, Olivia has changed jobs three times over the last eight years, and she participated in retirement plans at each. Her portfolio includes a 401(k) from a private company, a 403(b) from a university and an annuity she purchased on her own. In contrast, Jonathon’s portfolio has just one investment vehicle: a SIMPLE IRA set up by his employer of 14 years.

There’s no standard way to set up a retirement portfolio. Yours will be unique to you. Also, it’s never too early or too late to start saving.

How to start a retirement portfolio

A good way to start is by looking at what’s available to you now.

Many people take the first step toward building a nest egg by participating in an employer’s retirement plan. If your company offers a retirement savings plan and you’re not participating, start right away. The sooner you start saving and investing, the longer you’ll have to grow your nest egg.

In many cases, employers match employee contributions up to a certain limit. By not participating in matching plans, you’re leaving free money on the table. Plus, contributions you make now aren’t subject to income taxes until you withdraw the money in retirement.

If you’re a business owner or self-employed, you can set up an IRA or solo 401(k) to save and invest for retirement.

Whether you work for someone else or yourself, you may want explore IRA and stock investment services available through Consumers.  

Allocating retirement savings investments

When you open a retirement savings account, you’ll be asked how you want to allocate the funds. You can choose to put money in different types of investments like stocks, bonds, managed funds, CDs and cash. Funds can be allocated, or designated, in any combination.

Many retirement plans offer funds based on your age and are automatically adjusted over time. A younger person’s age-based fund usually focuses on growth as the primary goal. An older person’s age-based fund will minimize risk and shift toward investments that provide income rather than growth.

Diversification of investments

Have you ever heard “don’t put all your eggs in one basket”? This adage applies to retirement savings.

Rates of growth will vary by investment type and they are never guaranteed. Often, when stocks are performing well, bonds pay lower rates, and vice versa. The value of cash can erode if there’s inflation. Over time, industry performance can rise and fall. Diversification is a strategy of putting your “eggs” into several investment “baskets” in order to reduce your risk and maximize gains.

What does it mean to balance a portfolio?

Allocating your retirement savings among different investment types isn’t “one and done.” Over time, you’ll want to assess your investments to see if your current mix is optimized to reach your goals.

Factors that affect how and when you rebalance your portfolio include age, planned age of retirement, income needs, health, risk tolerance and the market.

More help is available

Congratulations, you’ve made it through the basics of understanding retirement portfolios!

Use what you’ve learned as a foundation to explore even more. And, keep in mind that you don’t have to do it alone! Check out our retirement planning services online or give us a call at 800-991-2221.

Consumers provides banking services for more than 100,000 members. If you have banking questions, call us at 800-991-2221. We make it easy to bank how you want, when you want.

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