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These 5 Things Will Bring You True Wealth

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When it comes to planning your retirement, some things are easy. Figuring out where you stand right now is as simple as looking at your latest brokerage statement. Determining how much you'll need when you retire takes a bit more work, but you can make a good estimate without too much effort. The hardest part is finding the right path to get you from here and now to that last day of work years down the road, and then through the rest of your life.

Nothing lies like a straight line
A lot of retirement advice you read makes it sound as if traveling that path is easy. You can get a good idea of what average return you'll need to earn in order to reach your ultimate goal. Take a financial calculator, enter in how much you think you'll be able to save and what returns you'll achieve, and it'll happily spit out the exact amount you'll have on your 65th birthday, down to the penny.

In real life, however, things don't work that way. You'll earn more or less than you expected, or suffer higher expenses than anticipated. And you'll almost never see a year in which your portfolio rises by that often-heralded 10% figure that corresponds to the long-term average annual return for stocks. As your circumstances change, you'll need to make some course corrections to keep you on the straight and narrow.

What you can control
The frustrating part of investing is how many things are beyond your control. Even when you're convinced that you're right about a certain stock pick, it doesn't always cooperate on your time schedule. General Motors shares, for instance, still trade above $0.60 despite assurances from the company itself that they will soon be completely worthless.

And more often, what you might think of as a "sure thing" turns out not to be certain at all. Those who thought that betting against the amazing comebacks in stocks like Las Vegas Sands (NYSE: LVS  ) , Sirius XM Radio (Nasdaq: SIRI  ) , and Citigroup (NYSE: C  ) was a guaranteed path to riches can certainly attest to that now.

There are, however, a number of things that you do have at least some control over. They include:

By adjusting these factors, you can deal with whatever happens in the years to come -- even if it ends up being a lot different from what your financial calculator predicted.

How to stay on track
Right now, many people don't have as much money as they thought they'd have by now. If you were counting on stocks to return 10% or more for you, then the S&P 500's negative overall performance over the past decade has likely created a big shortfall.

But you can choose how best to respond given your current situation. If you're in a position to boost your savings, then you might be fine keeping exactly the same investments you're making now. If you can't, then shifting some of your cash and bonds to conservative dividend-paying stocks such as Procter & Gamble (NYSE: PG  ) and PepsiCo (NYSE: PEP  ) could help you add a bit more growth potential to your portfolio.

On the other hand, if you've invested well, you might actually be ahead of where you expected to be. If big investments in high-reward, high-risk growth stocks like Apple (Nasdaq: AAPL  ) and Green Mountain Coffee Roasters (Nasdaq: GMCR  ) have paid off for you, then you don't need to take the chance of leaving that money on the table any longer. Riding your gains may sound good, but remember that many people passed on taking big profits from Internet stocks in the late 1990s -- and sacrificed a fortune during the ensuing tech bust.

Stay focused on the goal
Change is inevitable, but it doesn't have to derail your plans. If you can filter out all the turbulence and noise and focus solely on reaching the goal you set for yourself, then you'll be able to stay on the path to true wealth.

For tips on exactly how to invest for retirement and what to expect once you retire, check out our Motley Fool Rule Your Retirement newsletter. Start on the path to true wealth with a 30-day trial subscription -- it's absolutely free and there's no obligation.

Fool contributor Dan Caplinger has made countless course corrections in his years of work. He doesn't own shares of the companies mentioned in this article. Green Mountain Coffee Roasters is a Motley Fool Rule Breakers recommendation. Apple is a Stock Advisor recommendation. PepsiCo and Procter & Gamble are Income Investor picks. The Fool owns shares of Procter & Gamble. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy carries a wealth of information.


Read/Post Comments (2) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 07, 2009, at 9:19 PM, Fredlee009 wrote:

    Looks like in an effort to get hits, SiriusXM is again run under the bus and you are given wrong information. No no no no. SiriusXM was bet on by me to recover, and Im up OVER 600% RIGHT NOW. Please reedit this story and remove your mistake in including SiriusXM in the list of companies, were you bet big on them making it, and they didnt. They most certainly did. This is by far THE STOCK STORY OF 2009. No close second. Big big gains are still to come too. Do you own due diligence.

  • Report this Comment On October 12, 2009, at 4:59 PM, comissar wrote:

    The article talked about betting AGAINST the comebacks such as Sirius/XM as a "sure thing" was ultimately a FAILING strategy. Dan is agreeing with you.

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Dan Caplinger
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Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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