Forget About Retirement

Where memory's concerned, I have only slightly better recall than that guy from Memento. Birthdays and anniversaries always slip my mind. I forget names seconds after I hear them. And I've left my lunch at home in the fridge more times than I can count.

But some things are just too crucial to forget. Wearing pants when I leave the house, for example. Making sure the keys are outside the car before I lock it. And most importantly, taking steps to ensure that I'll have a fat pile of cash waiting for me when I finally hit retirement age. Luckily for me, there are a number of easy ways to make sure I don't have to remember to save for the future. None of them involve tattooing reminders on my skin, thankfully. ("Sammy Jankis?" Is he my broker or something?) But at least one of them involves just a bit of astronomy.

The black hole of future prosperity
According to science, a black hole -- the superdense gravity well created by a collapsing star -- is so dense that nothing, not even light, can escape it. Unless you listen to Stephen Hawking, that is. Hawking recently defied his own earlier theories, and lost a bet for a set of encyclopedias, by arguing that black holes store information about all the matter (asteroids, planetoids, unlucky UFOs) they collect over their life spans and eventually release it all, in a somewhat mangled form, when they finally dissipate.

Except for the "mangled" part, that's a pretty good analogy for an Individual Retirement Account, or IRA. You put money into the black hole of the IRA, and then -- at least, if you're smart -- you forget all about it for the next 50 or so years. When you hit age 70-and-a-half, all the money you put into it gets returned to you, hopefully with one significant alteration: There's a whole lot more of it.

IRAs come in two flavors, traditional and Roth. Mildly forgetful folks may prefer the traditional IRA, which lets them make tax-free contributions to their account (thereby allowing them to forget about paying a small but noticeable chunk in taxes to the IRS each year) in exchange for remembering to pay taxes on whatever money they withdraw when they hit retirement age. Investors like me, with sieves for brains, may prefer the even simpler Roth IRA. You won't be able to deduct your contributions, but you won't have to pay any taxes on the money you eventually withdraw, either. (One thing you should remember, though -- if your annual income hits $95,000 for single folks, or $150,000 for married couples, you'll no longer be able to make new contributions to a Roth IRA.)

So long as you don't exceed the maximum annual contribution -- $4,000 for most folks at the moment, or $5,000 if you're over 50 and playing catch-up -- you can put just about any sort of investment in your IRA. I've got a mutual fund, American Funds' Growth Fund of America (FUND:AGTHX), in my IRA, which gives me a piece of great companies such as Google (NASDAQ:GOOG), Motley Fool Inside Value pick Microsoft (NASDAQ:MSFT), Target (NYSE:TGT), Lowe's (NYSE:LOW), and Motley Fool Stock Advisor pick Time Warner (NYSE:TWX) in one easy purchase. Luckily for me, the Growth Fund of America's returns are steady enough that I only need to remember I own it about once a year. (That would be the time when I scan through the fund's annual report, to make sure that its performance hasn't calamitously nosedived and that its current, successful team of managers hasn't jumped ship.)

Investing for amnesiacs
But if you want an IRA you can almost completely forget about for decades at a time, consider stocking your account with a mutual fund or exchange-traded fund (ETF) indexed to the market as a whole. (Among index funds, Vanguard Total Stock Market (FUND:VTSMX), a model portfolio selection of Motley Fool Champion Funds, gets mentioned a lot around these parts.) You'll never get the market-beating results you might see by doing a bit of extra research for the right stocks or mutual funds, but you also won't have to sweat any of those pesky details like "trading" or "performance." Instead, you'll be able to enjoy a reasonably steady return roughly equal to the market as a whole.

When compounded by the market's annual average return of 10%, just look at what a yearly $4,000 could get you over time:

Sure, when you get closer to retirement, you'll need to remember to rebalance some of your (hopefully hefty) holdings into bonds and other less volatile investments. It still beats stuffing cash under your mattress.

And here's the best part: In most cases, you may not even need to remember to write a check for your monthly IRA contribution. Ask your broker or fund company about setting up an automatic deduction each month directly from your checking account. Not only will it ensure you never forget a payment, but its ease and relative painlessness may also let you forget you're making any sort of payment at all.

Regular retirement reminders
Forgetfulness can be bliss, but all the same, it's good to have at least a little retirement reminder every now and then, just to make sure you're on the right track. The Fool's Rule Your Retirement newsletter service is chock-full of practical, helpful advice to make sure you've got a soft landing at the end of your working days. Quick, before you forget -- sign up now for a free 30-day trial. In fact, I'm off to read my latest copy right now.

. uh . just as soon as I remember where I left it.

Nathan Alderman is pretty sure he's one of the Fool's online editors. The rest is all sort of hazy. He definitely remembers that he owns shares of the Growth Fund of America. The Fool's disclosure policy is unforgettable.