Question: When it comes to retirement savings, where should I begin?

Answer: One of the best vehicles that can help you financially plan for retirement is your workplace-based retirement program. Some plans are funded entirely by your Plan Sponsor or employer, while others allow you to make contributions on your own behalf. This answer will focus primarily on those plans that you may be able to contribute to yourself, since that is where you have the most control over where your retirement dollars are invested.

How much should you contribute to your retirement plan?
If your workplace-based retirement program allows you to make your own contributions, it will boost your long-term financial security to contribute as much as you can to the plan.

How should you invest your plan contributions?
If you contribute to your workplace-based retirement program, you usually have the option to decide how your plan contributions will be invested.* That's why it's important for you to learn as much as you can about the investment options that are available and to consider how you feel about certain types of investments (for example, can you sleep at night if your funds fluctuate in price?) before making any investment decisions.

Financial experts agree that asset allocation - spreading your money across different asset classes (stocks, bonds, and cash equivalents) - is a good way to help minimize some of the risks of investing. And taking that a step further by diversifying your investments within each asset class (large-cap stocks, small-cap stocks, long-term bonds, short-term bonds, etc.) can potentially stabilize your investment returns while decreasing your investment risk. That's because different investment types tend to move in different cycles; when one kind of investment is up, another type may be down. Having a variety of asset classes in your portfolio will enable you to better weather the rough spots in the market.

What kinds of investments are best?
The mix of investments that is right for you will depend on your age, your time horizon, your investment objectives and your risk tolerance. There are a number of interactive worksheets and modeling tools readily available with sample portfolio allocations to help you create your own strategy. Check with your plan administrator for details.

What is the first step?
While you will have some things to consider with respect to your workplace-based retirement program, the most important step you can take today is to join your plan. Once you do that, you've set yourself on the path to greater financial security in your retirement years.

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* Some contributions, such as any employer-matching contributions made to your plan account, must be invested in a specified way (such as in employer stock), as outlined in the plan documents.