Retirement Savings Rule 2: Plan for Your Future Goals and Needs

03 November 2011

This is the VOA Special English Economics Report.

Last week, we discussed limiting investment risk in retirement planning. So what are financial planners advising people to invest in?

Stocks and bonds are the best known investments and are important to any savings plan.

Instruments like savings accounts and certificates of deposit pay a small rate of interest. They carry little risk.

Annuities are another savings instrument with low risk.

PETER D’ARRUDA: “Worldwide people can put their money in annuities, which are basically savings accounts offered by insurance companies.”

But financial planner Pete D’Arruda also says it is important to make a decision about an annuity with a good financial planner. He warns that annuity agreements can be complex, and many bad ones are available.

Pete D’Arruda says good planning means placing money into financial securities and accounts that have different risk levels, using asset allocation.

PETER D’ARRUDA: ”So true asset allocation is having some in stocks, some in bonds, some in mutual funds, but then some in other places with guaranteed income and then safety and liquidity kind of accounts for emergencies.”

This method of savings follows the old saying you should not ‘put all your eggs in one basket.’ But that is not for everyone.