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3 Ways to Win the Retirement Planning Game

Close-up on ball-point pen and newspaper financial stock chart.
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When you speak to investors on a daily basis -- as I used to -- you often get to see the seedy underbelly of their retirement planning, or lack thereof. From those who were not saving for retirement because they didn't trust the stock market to those who were struggling with paying off debt, many people I spoke with had allowed circumstances to hold them back from properly preparing for life after work.

My experience is not unique: Statistics show that 36 percent of Americans have nothing saved for retirement, and the average retirement savings of a 50-year-old is just over $43,000. As a former stockbroker, I've been asked often how to succeed at retirement planning, and I usually offered the tips below.

1. Don't Let Your Starting Amount Hold You Back

One of the most common beliefs with investing for retirement is that you need to start with a lot of money. Of course, having more is better, but starting with less should not hold you back. When you delay your retirement planning, you lose out on the biggest ally -- time.

Think of saving for retirement as a marathon, not a sprint. It's less important to get a fast start out and more important that you pace yourself for the long haul. If you start to invest with little money now, you will develop a discipline that will help your retirement planning in the long run and give your money more time to grow.

Many online brokerages have minimum opening account balances of $1,000 or less. Less traditional, though still good, options like ShareBuilder from Capital One (COF) or Motif Investing allow you to start investing for as little as $250.

2. Be Cheap About Fees

Among the biggest impediments to building up your retirement nest egg are fees, such as the commissions associated with buying and selling individual stocks, or the "load" and management fees charged by mutual funds or exchange-traded funds.

I've spoken to many investors who had no clue what fees they were paying on their retirement accounts. Let's consider Fidelity Investments: It's a top-notch brokerage that does a great job serving clients' retirement needs. However, the average Fidelity customer pays just over $900 a year in fees. How can you keep your costs well below that level? By being an informed investor.
  • Instead of picking actively managed funds that charge high fees, select lower-priced passively managed index funds. (Research shows that higher-cost funds don't produce better returns than lower-cost ones.)
  • If you like to trade stocks within your retirement portfolio, either decrease your number of trades or ask your brokerage to charge you a lower commission. If you give your brokerage enough business, it will gladly grant your request.
  • Take advantage of lower-priced funds within your company-sponsored 401(k). If there aren't any, ask your benefits managers to add some.
3. Reject Fear

"Time is your friend; impulse is your enemy," Vanguard Group founder John Bogle once said. I love that quote. The stock market is horribly irrational. It could be argued that the market moves on 90 percent emotion and 10 percent reason. And when the bulk of your retirement is riding on how that mercurial beast behaves, it can be difficult to not let fear get the best of you. But consider what giving in to those emotions has cost investors over the past five or six years. When the market plunged at the start of the Great Recession, millions fled stocks -- selling low and losing huge. Then, still fearful, large percentages of them stayed away from Wall Street and missed the rebound, costing them all the profits they could have made as the major indexes returned to (and surpassed) their previous highs.

What Bogle is saying is to let time do its thing. Don't give into impulse or emotion when it comes to your investments; it'll only harm you in the long run.

Instead, ride the wave. Buy and hold. Take advantage of dollar-cost averaging, so that stock dips become opportunities, rather than cues to panic. Not only will this put you ahead in the retirement planning game, it'll also avail you to potential opportunities to bolster your portfolio. It can be difficult to remove emotion from your investing, especially when it comes to saving for retirement, but your portfolio will be much better served by allowing reason to dictate it.

John Schmoll is the founder of Frugal Rules, a finance blog that regularly discusses investing, budgeting, and frugal living. John is a father, husband and veteran of the financial services industry who's passionate about helping people find freedom through frugality. He also writes about growing your wealth about Sprout

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There are lots of ways to go about planning and investing in your retirement. Get some good starter points at Really, only you can plan for it, so you have to do because no one else will. And the sooner you get started, the better off you will be.

May 15 2014 at 1:18 AM Report abuse rate up rate down Reply

I agree with most of these tips. Most people are just afraid to start saving cause they have so little! Also - Most people are intimidated by their debt and will not even start to save and/or pay off debt because they think - why bother? If it seems like an improbable or even impossible task, most people probably wouldn't even try to fix it. This is why most young people these days feel hopeless - ever increasing debt from student loans and credit cards. The economy is mostly to blame, but there is still some hope.

I saw this posted somewhere before and I think it really is some of the best savings advice I've ever seen posted. Most young people would benefit from it:

Here's the path to retire on your own terms, in 7 steps:

1) Pay off your debts as fast as you possibly can. If this means living in a crappy studio apartment and eating ramen everyday for a couple of years, do it. If you want to buy a car, get a reliable beater. Get insurance for $25/month from Insurance Panda. Forget about buying a house until your debts are paid off.

2) Once you are out of debt, stay out of debt. The only exception to this rule is a vehicle and a house. If you want to get a nicer car, buy used and be able to pay it off in a year or 2.

3) If you are going to stay in the same spot for at least 10 years, buy a house, preferably with at least a little bit of usable land. An acre is good, 5 acres is better. Take the amount you are pre-approved for and cut it in half - that's how much you should spend on a house. Come to the table with at least 20% down and make a couple of extra mortgage payments every year. If you're going to be transferred or relocate every 5 years, forget about buying a house and rent instead.

4) Develop multiple revenue streams. Do contract work. Start a business on the side. Invest in a business as a silent partner. Raise chickens, breed dogs or grow apples. Build websites. Buy and sell antiques. Acquire rental property. Sell something that generates residual income. Learn to play the currency markets or trade stocks. Do whatever you can to generate income from multiple sources.

5) Grow these multiple revenue streams to the point that they generate enough consistent and reliable cash flow to replace your current income.

6) Make as much as you can. Save as much as you can. Give away as much as you can.

7) Retire!- the sooner, the better. Be sure you understand that "retirement" doesn't necessarily mean you stop working, it just means having the freedom to do what you want to do, when you want to do it.

Don't be foolish and fall into the trap of trying to measure your wealth by the value of your assets. Markets change. Valuations fluctuate. Instead, measure your wealth by the amount of cash flow your assets consistently generate.

May 01 2014 at 6:38 PM Report abuse +1 rate up rate down Reply

save everything! unplug cable, toss the smart phone, use progresso soup cans! , shop only at the salvation army, eat 75% less, stop driving, dig a latrine in the yard or sneak out at night and do your stuff behind a tree,
The list goes on and on. Then if you live to retire you can get it all back for 5 years :)

May 01 2014 at 4:19 PM Report abuse +1 rate up rate down Reply

All of this corporate reporting is tripe. Americans, you will never be able to retire you are in debt bondage as your children are. With no jobs, or precarisous employment you will be lucky to cover your funeral costs.

The retirement age is now 73, if you are lucky. Lack of unions, no protection for workers, low paying jobs, outsourcing and insourcing have left America a banana republic. Do not listen to these corporate thugs. Organize for a better life or die trying

May 01 2014 at 3:56 PM Report abuse rate up rate down Reply

To win at the retirement game start saving/investing early in life, be consistent, take advantage of any employer matching plan, max out contributions when possible, eliminate debt, avoid risks with your nest egg and plan for multiple streams of income once retired (social security, pensions, dividends, part time work, etc.). There is a great deal of information about retirement available on the web. I use several sites including the site Retirement And Good Living which provides information on finances, health, retirement locations, part time work and also has a great blog of guest posts about a variety of retirement topics.

May 01 2014 at 3:50 PM Report abuse +1 rate up rate down Reply

If you are on social security and medicare thank a democrat, if not and if you want to get rid of these 2 fine programs vote republican.

May 01 2014 at 2:07 PM Report abuse -4 rate up rate down Reply
2 replies to toosmart4u's comment

Yes, they figured out a way to have their own personal piggy bank and have people pay taxes on the same money twice. Thanks party of lies, deceit, taxing and spending!

May 01 2014 at 2:26 PM Report abuse -2 rate up rate down Reply

Are you kidding? Both parties are corporate; both parties are thugs. The democrats will never save your social security only an organized working class will. Capitalism is the problem, it puts profits before people and trickles money up to the rich

May 01 2014 at 3:58 PM Report abuse +4 rate up rate down Reply