Don’t get sidelined by investment legalese


Investing for your future is sometime made unnecessarily complicated, as I was recently reminded the other day.

We have a 32-year-old family friend who never saved for the future before, but he’s now landed a traditional career job. For the first time ever, he has access to a 401(k). But reality hit him smack in the face when he was grappling with 16 pages of paperwork to enroll in the 401(k) with his employer.

He asked me for help, so I looked through the paperwork. I was blown away by how difficult something that was so easy was presented. I had to go through the pages line by line and explain the answers to questions that were there to my young friend! Then, when it came to the part to pick investments, that stuff was written in complete legalese.

Jargon can shut you down cold. But don’t let it. Ask for help if you need it.

The other neat thing was that his employer has a generous 401(k) match…but you’d never be able to understand that by just reading the paperwork once! A 401(k) match is like you’re getting an instant pay raise. Just by saving for your own retirement, your employer will match your contributions up to a limit. That’s a steal of a deal in my book.

The choice that made the most sense for my young friend to do was a target-date retirement fund. This is usually the simplest way to get started investing for many people.

With a target-retirement fund, you select the year that’s closest to your expected date of retirement. Then you put all your money into that fund. As the years go by, the company that handles your investment adjusts the mix to make it more conservative the closer you get to retirement. It’s a great way to put saving for the future on autopilot.

Editor’s note: This segment originally aired July 2011.

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