Frank, age 26, has been working for the same company ever since he got out of the army two years ago. Still single, he spends a lot of his time and money restoring old muscle cars. However, he puts $250 into his company retirement savings plan every month. Frank saw how his dad had to put off retirement these last five years because he couldn't afford to retire. Frank is determined not to let that happen to him.

 

Since Frank's retirement is so far away, he can afford to be aggressive and invest in stocks. While they are riskier than bonds or money market funds, over the long term, stocks have historically outperformed other investments. Even though Frank is an aggressive investor, he divides his stock holdings among several different stock funds and places 10% in a bond fund. This approach gives his portfolio a degree of diversification and balance.

 

 

Elizabeth is 32 years old and married, with two children - three and five years old. She and her husband are stretched thin financially, with their mortgage, credit card, and auto loan payments eating up much of their salaries. Nevertheless, Elizabeth understands how important it is to save for retirement and she sets aside $30 every paycheck for her retirement plan. Her tight financial position makes her more cautious about her savings, so she chose a less aggressive portfolio than Frank's.

 

Elizabeth's investment portfolio is set up so that her money has the potential to grow over the long term. However, even though she has 30 years until she retires, she is uncomfortable about putting all of her plan money into stock funds. Therefore, her portfolio, with 35% invested in a mix of bonds and money market funds, reflects her more cautious approach to investing.

 

 

Maria is 44 years old. Neither she nor her husband has ever been good at saving, so she decided to save for retirement through her company plan. That's the easiest and most effective way for her to save. Since her contributions to the plan are taken out before she receives her paycheck, she knows she won't be tempted to spend the money.

 

Maria has taken a balanced approach to investing. Her portfolio is divided among stocks, bonds, and money market funds. Her investment mix is designed to achieve long-term growth with less volatility in her returns than a stock-only approach.

 

 

Earl is 59 years old. He has only five more years left on his mortgage, his youngest daughter is a senior in college, and his two other children are married. He is conservative and doesn't want the value of his plan investments to decline. He wants to preserve what he has while achieving some growth by reinvesting interest and dividends.

 

Earl's investment portfolio is fairly conservative. The 30% allocated to the money market fund should provide relative stability. The 50% allocated to bond funds provides an opportunity for some growth, but is not as risky as investing in stocks. The 20% allocated to stock funds provides possible growth without risking too much of Earl's account. Earl chose this porfolio mix because he knows he is not going to spend all of his retirement money the day he retires. He understands that the growth (or at least maintenance) of the value of his money while he's retired is just as important as when he is working and planning to retire.