Asset allocation is the process of spreading your money among a variety of investments, such as stocks, bonds, or short-term investments.
Target date investments do this for you—automatically.
Maybe you’re cashing your first paycheck or catching up with your retirement savings. Whatever your situation, the investment basics remain the same.
Use this investing basics guide to help you build and manage your portfolio. The more you know, the more confident you’ll be as you work toward your investment goals. And these tips apply to all levels of knowledge, whether you’re a new investor or just want to sharpen your skills.
If you choose not to invest in a target date investment, or if you’re managing accounts outside of your retirement plan, a balanced strategy can help you manage volatility and growth potential. Here are two important concepts to keep in mind:
Asset allocation is the process of spreading your money among a variety of investments, such as stocks, bonds, or short-term investments.
Target date investments do this for you—automatically.
Diversification is choosing a variety of investments within the three major asset types (for example, diversifying your holdings among stocks, bonds, and money markets). Basically, it's not putting all your eggs in one basket.
Target date investments do this for you automatically, too.
If you choose to assemble your own diversified portfolio, don't just ''set it and forget it''. Keep monitoring and adjusting as necessary on a regular basis.
Stay on schedule.
When you make consistent contributions on a regular schedule, you may save more. You also benefit from dollar cost averaging, which is the practice of buying the same dollar amount of a security at regularly scheduled intervals.
Keep it balanced.
As investments go up and down in value, the portfolio balance you originally set up will change over time. Check your balance of stocks, bonds, money markets, and other investments at least once a year. Adjust asset classes as needed to keep overall risk within your comfort zone and performance on track with your goals. And remember, target date investments do this for you, too.
Know the terms.
Volatility, yield, dividend reinvestment—investing has a language all its own. Our glossary is here anytime you need a quick definition of an investment term.
Saving for your future doesn’t need to be complicated or scary. Here are a few rules of thumb to get you started.
Save early
It pays to start now. And when you invest through a tax-advantaged retirement account, any earnings compound tax-deferred until you're ready to withdraw the money.
Set a goal
You'll probably need to replace approximately 75% of your pre-retirement income to maintain your lifestyle through your retirement years. So your savings could be a significant source of income.
Target 15%
Aim to save at least 15% of your income each year toward retirement. And be sure to take full advantage of any company match. It counts toward that 15% goal. Use the Retirement Income Calculator to estimate how much you'll need.
Prioritize contributions
The order in which you contribute to your retirement accounts can help increase your future spendable income.
Watch this video series to learn a few simple steps to ensure that your savings are at work.
Wherever you are in life, we can help you plan and save for a more secure financial future.
Keep these important birthdays in mind as you plan ahead.
62
You can start taking Social Security or consider waiting to maximize your benefits. Keep in mind—taking it early would mean receiving the smallest benefit available over your retirement.
65
Apply for Medicare, or you may be penalized. Learn more about enrolling and coverage options at medicare.gov.
70
Claim your Social Security benefits if you haven't already. Go to ssa.gov to set up an account and manage benefits online.
72*
Begin taking withdrawals known as required minimum distributions (RMDs) from most retirement accounts.
Think of this checklist as a simple overview to help you organize your retirement planning journey as well as a jumping-off place to pursue deeper information and insights.
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