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  • Basics of Investing

    When should you start saving for retirement? Right now would be a good time. Whether you are just out of school, at the peak of your career, or winding down after decades of work, retirement is something you should continually be saving for. And when you invest through a tax-advantaged retirement account, any earnings can compound tax-deferred until you're ready to withdraw the money.

    Participate in Your Employer's Plan, Then Consider an IRA

    If your employer offers a tax-deferred retirement savings plan, you should at least contribute enough to maximize all employer matching contributions. You should then try to follow these steps:

    1. Consider saving more for retirement with an IRA.
    2. Review the income requirements for a Roth or Traditional IRA and consider whether you expect to be in the same, a lower, or a higher tax bracket in retirement.
    3. If you still can afford to save more for retirement, continue to contribute the maximum allowed by your plan.

    Manage Risk While Maximizing Reward Potential

    Before you decide how to invest your savings, consider when you're going to need the money. This is also known as your time horizon. Once you've determined the number of years you will be investing and how much fluctuation you can tolerate in the value of your savings, you can begin to choose an asset allocation strategy. This strategy will serve as a blueprint for the way you invest, guiding your decisions about how much of your savings to invest in stocks, bonds, and short-term investments.

    The Right Asset Allocation Strategy Can Help You Manage Risk

    The best way to manage risk is through diversification. You can diversify by spreading your savings among stocks, bonds, and money market/stable value investments, or you can invest in a variety of different investments in one category, such as large-company stocks and small-company stocks or investment-grade bonds and high yield bonds. Of course, diversification cannot assure a profit or protect against loss in a declining market.

    Next steps:

    Discover the Amazing IRA with our informative infographic.

    Learn more about investing in an IRA.

    Investing

    How to Select the Investments That Are Right for You

    Do your homework before selecting investments by following these steps:

    1. Diversify by choosing an asset allocation strategy that takes your time horizon and risk tolerance into account. For example, if your time horizon is more than 10 years, you may want to consider investments that offer the strongest potential for growth, such as stock funds.
    2. Review the T. Rowe Price investment options. You can choose from more than 100 no-load mutual funds appropriate for retirement investing.
    3. You may also want to consider one of the T. Rowe Price Target Date Funds. Each fund offers a diversified portfolio that is professionally managed to a specific retirement date. These funds are designed to help you meet your changing financial needs as you save for, approach, and live in retirement.

    Manage Risk While Maximizing Reward Potential

    Before you decide how to invest your savings, consider when you're going to need the money. This is also known as your time horizon. Once you've determined the number of years you will be investing and how much fluctuation you can tolerate in the value of your savings, you can begin to choose an asset allocation strategy. This strategy will serve as a blueprint for the way you invest, guiding your decisions about how much of your savings to invest in stocks, bonds, and short-term investments.

    Next steps:

    Learn more about the T. Rowe Price Target Date Funds.

    Learn more about our full range of no-load T. Rowe Price funds.

    Get Ready

    We recommend that you plan on being able to replace between 60% and 80% of your preretirement annual income to maintain your lifestyle in retirement. While some of that will come from other sources, like Social Security, most will come from your retirement savings. The Ready-2-Retire tool can help you develop a personal plan for how you want to spend your retirement and also assess your preparedness for the uncertainties that you may face in retirement.

    Five Things to Think About

    As you approach retirement, here are some important things to consider:

    1. The potential length of your retirement.
    2. How inflation can impact your savings.
    3. The need for cash reserves.
    4. How your investment focus and style may change.
    5. Getting help from financial experts.

    Investing for Your Retirement Goals

    T. Rowe Price provides a range of products and services to help you invest for retirement. Review the following options to see which may fit your needs best:

    1. Both the Traditional IRA and the Roth IRA allow you to save for retirement while deriving tax advantages. If you qualify, you may be able to make tax-deductible contributions to a Traditional IRA or tax-free withdrawals from a Roth IRA. You can also convert your Traditional IRA to a Roth IRA regardless of your modified adjusted gross income (MAGI).
    2. Rollover IRAs may be appropriate for those who might be changing jobs, retiring, or deciding what to do with money left in a former employer's retirement plan.

    How Much Do I Need to Save?

    Our Retirement Income Calculator can help you decide how much you'll need to save to meet your goals and how long your savings are likely to last. T. Rowe Price offers Advisory Planning Services to assist those who are saving for retirement, are approaching retirement, or are already retired, as well as those seeking a thorough evaluation of their overall investment portfolio.

    The Right Asset Allocation Strategy Can Help You Manage Risk

    The best way to manage risk is through diversification. You can diversify by spreading your savings among stocks, bonds, and money market/stable value investments, or you can invest in a variety of different investments in one category, such as large-company stocks and small-company stocks or investment-grade bonds and high yield bonds. Of course, diversification cannot assure a profit or protect against loss in a declining market.

    It's Time

    Now that you've retired, you've learned that retirement planning is an ongoing process. You've also learned that how you spend your money is as important as how you saved it. As your own personal situation changes, your retirement needs will change as well. We recommend revisiting at different stages of your life.

    Understand the Risks to Your Retirement Savings

    While you may have saved a great deal for retirement, there are a number of things that you should learn about to ensure your retirement strategy remains on track. Retirees are living longer. Today, there is a 23% chance that at least one member of a 65-year-old couple will live to age 95. And with improving health care, life spans will continue to increase.

    Market volatility. As capital markets move, the value of your investments can fluctuate. Many experts recommend that you invest with both short- and long-term goals in mind. To address short-term income needs, invest a portion of your portfolio in fixed income investments. They generally include products such as bonds and bond funds, money market funds, and certificates of deposit. They carry less volatility over shorter periods and can provide you with a combination of stability, liquidity, and income potential.

    Inflation. Inflation has averaged approximately 3% annually over the past 80 years. At that pace, a lunch that costs about $8 today could set you back more than $14 in 20 years. This increase in the costs of goods and services will erode the purchasing power of the assets you've set aside to meet these expenses. To help ensure your assets continue to grow at a rate sufficient to last throughout retirement, you should consider investing a significant portion of your portfolio in stocks.

    A Smart Asset Allocation Strategy Is Still Important

    More than ever, it's important to maintain a diversified portfolio. Portfolio allocation is essential to balance the impact of market volatility and inflation on retirement savings. Allocating your portfolio among asset classes such as stocks, bonds, and short-term investments can help you manage short-term market volatility while still providing your investments with growth potential. Of course, no asset allocation can assure a profit or protect against loss in a declining market.

    Although shorter-term investments, such as bonds and cash equivalents, offer some protection against market risk, there is also less potential for growth. As a result, stocks should continue to play a key role in your portfolio, with the potential for greater returns helping to insulate the portfolio from inflation and longevity risks.

    T. Rowe Price offers Advisory Planning Services for investors who are saving for, nearing, or living in retirement, helping you create and manage an effective long-term investment strategy.

    Next steps:

    Determine your Age-Related Milestones.

    Learn more about fixed income investing.

    Consider our Advisory Planning Services.

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