Begin saving immediately and do not stop. No one retires with too much.

To help maximize your chanc­es of a financially secure retire­ment, start with a realistic assess­ment of how much you will need to save. If the figure is substantial, do not be discouraged—the most important thing is to begin sav­ing now. Although it is never too late to save for retirement, the sooner you start, the more time your investments have to grow. Do not underestimate the value of compounding when trying to pursue a long term investment goal.

Save for retirement – no matter what

If your employer offers a retirement savings plan, such as a 401(k) or a 403(b), join it as soon as possible and contribute as much as you can. It is easy to save because your contributions are deducted pre-tax directly from your pay, and some employers will even match a portion of what you contribute. Individuals can contribute $16,500 to a 401(k) in 2009, with individuals over the age of 50 allowed to make a $5,000 “catch up” contribu­tion. Another option is an IRA, which allows contributions up to $5,000 in 2009 and $1,000 in “catch up” contributions for indi­viduals over age 50. IRA’s are, however, sub­ject to income limits.

Do not let the unrest in the market place put off or reduce the amount of money you would contrib­ute to retire­ment plans. When the market comes back, it does not waste time and you may not want to be watching from the sidelines. It never ceases to amaze me that people like to buy everything on sale except when it comes to investing.

Importance of proper asset allocation

The combination of invest­ments you choose can be equally as important as the specific investments. The mix of vari­ous asset classes, such as stocks, bonds, and alternative invest­ments account for most of the ups and downs of a portfolio’s return. Each type of investment has specific strengths and weak­nesses that enable it to play a spe­cific role in your overall invest­ment strategy. Determining the proportions of your portfolio to be allocated to each asset class will depend on your investment time horizon and comfort level with risk. Your asset allocation should balance your financial goals and help you to sleep soundly at night.

Rebalancing to ensure consistency

Selling your winners to pur­chase more of your losers does not sound like a great idea at the time, but rebalancing a port­folio is extremely important to ensure it stays in-line with your goals when they were originally established. Many people will rebalance their portfolio after a set amount of time or after a certain asset class gets more than a certain percent­age “out of line”. Keep in mind that too-frequent rebalancing can have adverse tax consequences for taxable accounts as well as unnec­essary expenses.