How to Manage Retirement Funds
- 1). Examine your fears and let go of them, financial guru Suze Orman suggests in her book "The 9 Steps to Financial Freedom." Orman mentions the clients who always lost money, referring to them as the ones with the "kiss of death." These investors were never really secure in their decisions, so they usually panicked when the market teetered and they made bad decisions. Whatever your financial fears are, whether you're worried just about not paying the bills this month or you believe you're not qualified to manage your own money, now is the time to face them.
- 2). Determine your risk level. Some people feel comfortable with higher levels of risk, while others want more security. Your portfolio management should reflect your personal tastes. However, Orman counsels, you should take your age into account too; you can afford to invest more aggressively when you're young because you have more time to build up your wealth.
- 3). Allocate your assets accordingly in your personal investment account, based on the risk level that you decided on. Asset allocation refers to the diversity of your portfolio; for instance, an investment portfolio with 100 percent stocks bears more risk than a portfolio with 50 percent in stocks and 50 percent in bonds. However you choose to allocate your assets to manage your retirement money, make sure that your investments are diversified.
- 4). Keep track of your 401(k) account at work. Many Americans use a 401(k) to manage their retirement money, and you should definitely enroll in one. Once you do, you should receive benefit statements from your plan administrator. Make sure you review these benefit statements to check them for errors.
- 5). Change your portfolio to minimize risk as you approach retirement age. Older people have less time to wait out the inevitable ups and downs of the market, and you don't want to get caught short just because the market took a dive right before you wanted to retire. Consider taking most of your money out of stocks and converting it into something safer, like index funds or mutual funds.
- 6). Withdraw no more than 4 percent of your total retirement fund each year after you retire. This is the amount that experts suggest is a sustainable sum to draw out of your account each year in order to support a 20- to 25-year retirement.
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