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How to invest for a comfortable retirement: 6 tips to manage stocks, IRAs, more

TODAY financial editor Jean Chatzky offers tips on retirement accounts, investment help and savings plans to help you better invest for the future.
/ Source: TODAY

Everyone wants a comfortable retirement, which means putting money you have saved to work for you in a smart way.

TODAY financial editor Jean Chatzky has six areas to focus on when it comes to investing for tomorrow and position yourself for a secure financial future. Thursday on TODAY, Chatzky shared tips in all six areas and stressed moving your money to safety, rebalancing your investments annually, and paying yourself first by making sure you have enough saved.

These tips are the latest installment of the #StartToday series, helping you begin 2016 with resolutions for your home, body and wallet. Here's the full list:

1. Retirement accounts

Company option: If your company offers a specific retirement plan or 401 (k), that's a good place to start saving for down the road.

MyRA program: If a company retirement plan is not offered, one option is a MyRA, or My Retirement Account, an account developed by the U.S. Department of the Treasury. It's a Roth IRA, which only invests in treasury bonds, and there are no fees, no minimum balance and no contribution requirements.

IRAs: Individual Retirement Accounts offer another vehicle for saving.

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2. Know what should be saved

Save what you need for the next 3 years: Any money you need for things like paying for college, a down payment on a house or living expenses that isn't covered by Social Security should not be in the stock market because it's too risky and a downturn in the market could wipe out money you cannot afford to lose.

If safe money is in stock markets, sell: Pull your safe money out of the stock market and put it in things like savings accounts, money market funds, CDs and short-term government bond funds. Move that money to safety even if it means taking a small loss because keeping it in the market could mean much bigger losses.

Retired couple

3. Calculate asset allocation

Investment mix: Determine how your money is split between stocks, fixed income (or bonds) and cash.

Percentage should go down as you age: You want to reduce the percentage of your money tied up in stocks as you age so that it lessens as you get closer to retirement. If you subtract your age from 100, that's generally the percentage you want in stocks, with the rest in bonds and cash.

Rebalance once a year: Take the time to balance out your portfolio once a year and get your asset allocation to where it should be.

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4. Getting investment help

Target date retirement fund: This is a mutual fund available in most 401 (k) plans and via brokerage firms that you can buy with a date that syncs up with the date you plan to retire.

A managed account: This is another plan within your 401 (k), where you pay a fee for a portfolio that is specifically customized for your needs. Only about 40 percent of 401 (k) plans offer one, but people who opt for a managed account save 28 percent more, according to Morningstar.

Robo-advisors: Computerized services like Wealthfront, Betterment, Vanguard and Charles Schwab offer services where you tell a computer program about your goals, age, and risk tolerance, and the software invests your money for you.

Financial advisors: You can also get an actual human to manage your money, where the fee is generally 1 percent of the money you have under management per year.

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5. Keeping investment fees low

"Passive" investments win over "active": Research shows that "passive" investments like index funds do better over the long term than "active" investments where a mutual fund manager is paid to manage your portfolio. Fees are important because the money that doesn't go into the pocket of your investment manager goes into yours.

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6. Make Sure You're Saving Enough

Golden rule - Save 15 percent of everything you earn: You want to be saving 15 percent of your earnings at all times. These are milestones to be aware of as you age, according to Fidelity. If you haven't hit these numbers, step up your saving to approach them sooner rather than later.

How much you should be saving by age milestones, according to Fidelity.
How much you should be saving by age milestones, according to Fidelity.TODAY

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