Transcript: Financial Education Keys to Retirement Success Find Your Balance

When you exercise, stretching and improving your balance can help you stay in shape. Turns out your retirement plan can benefit from a little balance too. It’s called asset allocation. By having the right mix of investments, you have the potential to achieve your goals while helping manage your risk.

There are three basic types of investments. Cash and stable value investments help keep your original investments safe, but have limited potential for growth. When you buy a bond, you’re lending money to a corporation or government entity. In return, you receive regular interest payments until the money is repaid. Bonds can provide a relatively stable form of regular income, but typically offer only moderate growth.

Buying stocks gives you part ownership in companies. Your goal is that the company’s value will increase over time, and your investment will be worth more than when you bought it. Historically stocks have produced higher returns than either cash or bonds, but they can also involve greater downside risk. The further away your retirement, the more stocks you may want to hold because you’ll have time to benefit from long-term gains and recover any short-term losses. Find your balance by deciding the level of risk you’re comfortable with based on your retirement time horizon. Then choose investments that match your level of risk and timeframe. Remember, not having enough money for a comfortable retirement can be the greatest risk of all.

Just as balancing requires constantly making small adjustments to keep from falling, balancing your retirement plan requires regular adjustments too. At least once a year, or more, if there’s been unusual market activity, you should check your retirement plan’s asset allocation and make sure it’s still in balance.

For example, if you split your assets 70% in stock mutual funds and 30% in bond funds, and the stock market performed particularly well, the value of your stock funds might grow to represent 80% of your investment. To keep your balance, you’d want to shift 10% of your stock funds back into bond funds to return to your original asset allocation.

Now it’s time to find your balance. Take a look at your asset allocation online or call a retirement specialist now.

Saving enough for retirement?

Find out with My Retirement Plan, an online tool that makes it easy to see if you are on track. After you answer a few questions, My Retirement Plan will calculate your retirement savings goal and recommend personalized next steps.

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