Retirement planning --- focus on your time horizon

Each day the financial markets ride the roller coaster ride which would lead you to believe everything from the sky is falling to we are out of the woods.  Are we in a recession?  Or, yes we are, so when will it end?

Today, oil prices dip below $130 a barrel after spending time above $143 recently.  The stock market, measured by various indexes are up almost 2.5% in the last couple of days.  So, are we out of the woods or are these gains short-lived?  I haven't a clue.  What I can tell you is it pays to diversify, carefully, within your time horizon and risk tolerance.

It is never too early to think about retirement and this requires a savings and investment plan.  You can check with Kiplinger's to determine if you savings in on course.  This will allow you to check your age, the amount currently have in a nest egg and how much you need to save from now until 65 to get to your goal.

When you are working through this process there are a lot of "formulas" for savings and investing that you will run across, however, these are guides and you are the only one who can determine what level of risk you are comfortable with and how close to retirement you are.  Some "formulas" relate to how much of your portfolio should be subject to the fluctuations of the stock markets (so stocks versus bonds/cash balance).  The common rule of thumb is to take 100 and subtract your age to get the percentage of your portfolio which should be invested in stocks (equity) and the remainder in cash/bonds (fixed income).  This is a start, and again just a guide.  You also need to determine if you want to put that stock and/or bond percentage in domestic or international or both, how risky (small cap versus large cap for stock; short-term versus long-term debt instruments for bonds).

Some % model portfolios using mutual funds could be like this:

10 years + before retirement (moderately aggressive)

20% International Large Cap stocks

15%  Large Cap Growth - domestic

15% Mid Cap Growth - domestic

15% Small Cap Growth - domestic

10% Emerging markets

20% Domestic bonds

5%  International bonds or commodities

10 years + before retirement ( moderately conservative)

20% Treasury Bond fund

40% Balanced Fund

10% Large Cap Growth Fund

10% Large Cap Value Fund

10% International Large Cap Fund

10% Cash Equivalents

Again, these are ideas and you need to determine your risk tolerance, time horizon, and total funding goal to determine if you are on track or need to invest more!