Smart Retirement Investing

The only way your retirement savings are going to multiply is if you invest them intelligently. Putting money in a checking or savings account will earn you less interest than you'll lose as a result of inflation. The value of that money will actually decrease over time. In order to beat inflation you have to invest in such a way that your rate of return goes above and beyond inflation. The best place to do that is the market. But the market is risky! How can you maximize your earnings while minimizing your risk?


Diversity is the first key to smart retirement investing. You don't want all your eggs in one basket. There are countless investment opportunities from individual stocks and mutual funds to commodities, real estate, and CDs. Your money should ideally be spread out among them all. Generally, when one class of assets loses value another class goes up. If you're well diversified you won't lose all of your money if one group takes a dive.

If you're not a professional investor, you probably don't know how and where to invest your money. In that case, you should hire a financial advisor or investment company. If you are investing your own money, don't fall into the trap of trying to profit from ups and downs, known as timing the market. This is a sure way for most to lose money over time.

401(k) & IRA Accounts

Put the maximum amount possible each year in either a 401(k), and/or a Roth IRA, or traditional IRA. If you make below the allowable amount to contribute to a Roth IRA you can earn money without paying taxes on the earnings, even when you withdraw it. If you make too much to put into a Roth IRA you can still contribute to a traditional IRA, allowing you not to pay taxes until you take your money out. See our article on retirement plans for more information.

Time and Money

The longer you're in the market, the better you'll do. You should make a plan and start saving as early as you can, putting away as much as you can. You should either decide upon a fixed percentage of each paycheck to invest for retirement, or decide upon a maximum amount of money to spend. Using the maximum amount to spend approach is great for people who expect to earn more and more over time. It allows you to save a larger percentage of money as your earnings increase, rather than spending a larger amount. You might start with spending an amount of money that's equal to 70% or 80% of your income, but stick with that fixed amount even as your income grows.

In either case, make yourself a retirement goal, come up with a plan to accomplish that goal, and stick to it. You can use our free retirement calculator to find out how much you need to put aside each month to reach your goal.