Who can forget the Ronco infomercials from our childhood? The ones where Ron Popeil would stick four chickens in a countertop rotisserie cooker and the audience would shout “SET IT AND FORGET IT!” with so much enthusiasm that you knew they must have been getting some kind of compensation other than a perfectly done chicken.
I can see you sitting here reading this saying “What in the world does this have to do with retirement?” It’s simple, actually. I want you to think about saving for retirement the Ronco Way – to “SET IT AND FORGET IT!”
Now, there are many things I can mean by this, but here is just a sample:
Automate your savings: Whether it is enrolling in your employer’s retirement plan and having a certain percentage of your salary withheld each paycheck or setting up an auto-draft from your bank account into an IRA, creating an automatic savings plan is great way to ensure that you don’t forget to make contributions to your retirement accounts.
The only thing that you don’t want to forget here is to check your level of savings at least once a year. If you think you can save a little more, up your 401(k) contribution by a percentage or two or add $50 a month to your IRA contribution. I also advise the same in reverse – if you can’t maintain your savings rate, don’t stop all together, but pull back just a little.
Choose an investment portfolio and stick with it: If you aren’t confident when it comes to picking a portfolio for your accounts, don’t be afraid to consult a financial advisor. Another option, especially if your account balance is small or you are just starting to save, is to select a “lifecycle fund.” These are the ones that have a year listed somewhere in the title that will correspond your prospective retirement date. Lifecycle funds are comprised of different types of funds including bonds, stocks, and international investments. The main idea behind this type of fund is that the farther you are from retirement, the more risk you can handle in your portfolio. As you get closer to retirement, the fund managers will adjust the portfolio so that it is less risky.
The reason I say to stick with it is that research has proven that maintaining an investment within a portfolio over time results in greater gains than adjusting the portfolio based on where you think the market is headed.
Don’t touch it: This relates to the “FORGET IT” part of the mantra. You have put the money aside for retirement – leave it there until that time of your life. If you need the money for an emergency, try not to take it from your retirement accounts as robbing the accounts can create tax implications, including a 10% penalty for taking an early distribution.
So, what are you waiting for (aside from that rotisserie chicken to finish)? Set and forget your retirement savings plan as soon as you can!