When it comes to retirement, the advice is seemingly endless. From IRAs to annuities, savings accounts to 401(k)s, everybody's got an opinion. Retirement websites and publications teem with more options than one would-be retiree could possibly use. And pockets of poorly conceived advice aside, there's wisdom in ample choices.
Slow and steady ...
The best way to retire? Remain consistent. When it comes to long-term savings and investing, continuity is key. Sure, you may experience a sudden windfall -- an inheritance, perhaps, or a big bonus, or, yes, even a lottery jackpot -- but consider this the exception, rather than the rule.
So how exactly do you maintain consistency throughout life's ups and downs? Three simple steps will get you there.
First of all, choose your retirement investments wisely, keeping in mind your personal strengths and weaknesses. Do you have time to manage your investments one by one, studying them quarterly and keeping an eye on their progress? If so, a portfolio heavier in individual stocks may be a winning choice.
If you'd rather wind up your portfolio and let it propel itself forward with less hands-on work, mutual funds and ETFs may be a better plan. A retirement-focused fund such as the Vanguard Target Retirement 2020 (VTWNX), for instance, holds a stake in a broad swath of funds including Vanguard Total Stock Market, Vanguard Pacific Stock Index, and Vanguard European Index. In one swoop, you hold such broadly diversified companies as Bank of America
But don't lose sight of your lower-yielding savings while you invest. Since the market tends to fluctuate at the most inopportune times, it's never wise to keep all of your money tied up in investments. By making the most of money-market accounts, CDs, and even plain-vanilla savings accounts, you're giving yourself a margin of safety that can't be taken away even if the market swoons (heaven forbid!) and your sensible investments follow suit in the short term.
Finally, live below your means. It's not nearly as sexy as investing or even plain old saving, but it's absolutely critical for a good retirement. If you live beyond what you can afford, you're all but securing yourself a rocky retirement. If you're prudent now, though -- not "cheap," but prudent -- you can live lavishly later. It's a delayed-gratification game.
The Foolish bottom line
The whole retirement process is a delayed-gratification game. The best way to retire is slow and steady. Consistency is key. Continuity in your planning process and in the pursuit of your desired results is a major factor in your ultimate success. If you keep your goals at the forefront of your mind and pursue them with solid investments, a down-to-earth lifestyle, and a nice savings account in your back pocket, you'll make your way to a happy retirement. And I can't think of anything better than that.
Hope Nelson-Pope is online coordinating editor at The Motley Fool. She owns none of the companies mentioned in this article. Total SA and Bank of America are Income Investor recommendations. The Motley Fool has a disclosure policy.
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