The Retirement Marathon

In 1900, retirement wasn't a hot topic. Employers didn't offer pensions, there was no Social Security, and the average life expectancy was about 50.

But more than a century later, everything's changed. Most people retire by the time they turn 65 — and they expect to live 20 years or more in retirement. Current estimates suggest that a million or more people now in their 40s will live to be 100 or more.

READY, SET, GO
The general wisdom is that planning your financial future starts with your first job. That's when you can begin putting money into an individual retirement account (IRA) and a 401(k), 403(b), or similar plan if your employer offers one.. Even though you'll probably have lots of shorter-term reasons to invest, such as buying a car or a home, you should be thinking early on about long-term goals: your financial security and the security of those you care about.

You'll quickly discover that there are lots of ways to invest for the future — including some that have built-in tax benefits. At the same time, you have to remember that you take certain risks when you invest. Your return isn't guaranteed, and while your account value may increase substantially over time, you could also lose some or all of your principal, or the amount you invest.

IN YOUR 20s: GETTING STARTED

Contributing to a tax-deferred or tax-exempt retirement savings plan
Setting up a taxable investment account with a mutual fund, brokerage firm, or bank

While you may be paying off college debts or struggling to meet living expenses, the advantages of getting an early start on a long-term investment plan are too good to pass up.

Ideally, you should be investing up to 10% of your pretax income. If you're in a traditional employer sponsored retirement plan that deducts your contribution from your salary, your taxable income will be reduced. That means current tax savings — a reward for doing the right thing. If you're offered and choose a tax-free alternative, your earnings will be income tax free if you follow the withdrawal rules.

Though some of your taxable investments should be liquid, or easy to turn into cash without loss of value, the best choices may be stocks, stock mutual funds, or stock ETFs. The growth they have the potential to provide has historically justified the risk of possible losses in the short term.

IN YOUR 30s & 40s: HITTING YOUR STRIDE
Even while you're juggling your income to pay for things that might seem more pressing, like buying a home, supporting a family, or anticipating your children's college expenses, you need to build your long-term investments.

One technique is to split the amount you invest between long- and short-term goals. Even if you put less into long-term plans than you'd like, at least these investments have the potential to grow, especially if you're building on a portfolio you started in your 20s.

Your long-term investments should probably be in stock, stock mutual funds, and stock ETFs, but short-term investments should be more liquid. Keep in mind that investing for the long term is good for your current financial situation too:

You save on current income taxes by participating in a salary reduction plan
You may qualify for a mortgage more easily if you have investment assets
You can borrow from some retirement plans without incurring taxes and penalties

IN YOUR 50s: THE FAR TURN
You may be earning more than before, but you may be spending more too. College expenses can wreak havoc on long-term investment goals. So can expensive hobbies, or moving to a bigger house.

On the other hand, if you've established good investing habits — like participating inan employer sponsored retirement plan and an IRA plus putting money into a portfolio of stocks, stock mutual funds, ETFs, and fixed-income investments — your long-term goals are more likely to be on track. You may also find that the demands on your current income eventually begin to decrease: The mortgage gets paid off, the children eventually grow up, or you inherit assets from your parents.

That means you can begin to put more money into your long-term portfolio — through your employer's salary reduction plan, in an IRA, and with taxable accounts.

IN YOUR 60s: THE HOME STRETCH
When you start thinking seriously about retirement, you want to be sure you'll have enough income to live comfortably. If you have money coming in from a pension and investments, you'll have more flexibility to retire when you want.

Because many people can expect to live 20 or 30 years after they retire, you'll want to continue to invest even as you begin collecting on your retirement plans. One approach is to deposit earnings on certain investments into an account earmarked to make new ones. Another is to stagger the maturity dates of bonds or other fixed-income assets, like CDs, so that you have capital to reinvest if a good opportunity comes along.

Some of the other financial decisions you'll be facing may be dictated by government rules about when and what you must withdraw from your retirement accounts. Others may be driven by your concerns about healthcare or your desire to leave money to your heirs. At the least, you'll have to consider:

Shifting investments to produce more income with fewer risks, in case of a downturn in the financial markets
Rolling over retirement payouts to preserve their tax-deferred status
Finding ways to reduce estate taxes and pay those that are unavoidable

PROTECTING YOUR FUTURE
To safeguard your financial future and the future of people who matter to you, you need a strategy that builds your assets at the same time it protects them against the assaults of taxes, inflation, and market ups and downs. The sooner you put a strategy in place, the stronger your position is likely to be.

WHAT THE FUTURE HOLDS
The truth is that retirement age is relative, not fixed. Many government workers retire after 20 years of service — sometimes as soon as their early 40s. Some people work productively through their 80s, thinking of retirement as something other people do. Many others retire the first day they're eligible. Still others leave work unwillingly, taking early retirement packages they can't refuse or about which they have no choice.

What you do about retirement may fit one of those patterns, or may be one you design for yourself. But whether retirement is a long way off, or sneaking up on you faster than you care to imagine, in planning for your financial future, you're likely to have three main objectives:

Financial security
Adequate healthcare
Ability to live where and how you'd like

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