Investing can seem complicated and risky, but in order to retire comfortably it is critical to make it a part of your financial strategy, says Gail MarksJarvis. Gail is a columnist for the Chicago Tribune
and author of the new book Saving for Retirement (Without Living Like a Pauper or Winning the Lottery)
. Gail shares with Jean her strategy for sailing comfortably into retirement:
- Simply saving doesn't cut it. Gail says you can save all the money you make and still not get anywhere. In her book, Gail interviews a professor who had $250,000 in a savings account—but without investing that large sum of money, it didn't go very far in retirement.
- Compound interest is your friend. Compound interest is what makes your money grow. Gail says the younger you are when you start saving, the more money you'll end up with at the end of the line. Gail says compound interest is particularly important when you're talking about money market and savings accounts.
- A 401(k) or IRA isn't an investment in and of itself. Gail says if you put money in your 401(k) or IRA, but then just let it sit there, it will be the equivalent of a savings account. To create a return, she says you have to invest the money that you put in.
- Invest differently as you age. When you're young you need stock investments and you should buy into the overall market through index funds, Gail says. As you age, you should shift your money to bonds, which Gail says offer less return but are quite a bit safer.
- Be wary of brokers. Gail says that brokers often have incentives to sell you particular stocks. In particular, she says that too many brokers prey on women based on the stereotype that they don't understand finances.
- Invest in both international and domestic stocks. The international market makes up 50 percent of the world, and Gail says you can put between 25 and 30 percent there and the rest in the U.S. market.
The information provided here is general advice and you should always consult your own financial adviser before making major financial decisions, including investments or changes to your portfolio. The opinions expressed by the hosts, guests and callers to Oprah Radio are strictly their own.