To find a lifecycle fund that might be suitable for you go to the security search field and type in "lifecycle." Find the fund that has the closest year to your projected retirement—in its name and that is the right one for you! For example, FUND 2050 is the right choice for someone who is currently 25 and plans to retire at 65. There will likely be several different companies to choose from—we recommend going with a name you know or find the one that charges the lowest expenses.

The problem with lifecycle funds is that they can be a little more expensive because you are paying a manager to make all the investment decisions for you. So what’s the alternative?

Option 2:
You can pick your own individual investments. Don’t be scared—it’s not as hard as it may sound. We recommend that you buy only index funds. To refresh your memory from yesterday an index fund is….

A security that group together a certain asset class (most commonly stocks or bonds) in an attempt to diversify your risk within that asset class. For example, the S&P 500 groups together 500 of the largest U.S. based companies. Its return is thought to be representative of the stock market as a whole. As such, when you buy the S&P 500 you buy a little piece of all of the 500 companies—and voila!—you have a diversified stock portfolio. Since a manager isn’t making individual security selections index funds are the cheapest thing you can buy.

So, you might ask how do I choose? Well, first, you need to determine based on your age what percentage of your money should go to stocks vs. bonds. If you don’t remember what percentage is right for you read our "Rule of Thumb" equation.

Now that you know what percentage of your money you should be investing in stocks we recommend that you find a U.S. stock index fund. The most common type of index fund is for the S&P 500. You’ve probably heard the term before, that’s because it is a great representation across industries of publicly traded U.S. companies. Type "S&P500 Index" into that search box we mentioned before and you will have no shortage of choices. This is a good linchpin for your portfolio. We also suggest that you invest a portion of your stock allocation outside the U.S. Experts typically say somewhere between 10% and 35% of your stock allocation is a good guidepost.

If you opt for either the lifecycle or index strategies for your retirement, good for you—you will be properly invested for retirement! But we want to be clear: These are great “minimum-effort” strategies. Realize that there are many different types of funds in which to invest! Each fund has a different investment goal, and if/when your goals change, you want to make sure your strategy does, too.

We can’t tell you exactly what securities to buy, but we assure you if you chose one of the brokerage firms we recommended they will have great tools online and awesome support to help you.

So...go get started!

Play around with the tools on your online brokerage account to understand what is the best fund for you and how much you need to start (and to continue!) saving for retirement.

Among the companies we recommend, each has tools to help you determine...

1. How much you will need for retirement
2. Your asset allocation (doesn’t hurt to confirm what the "Rule of Thumb" equation suggested)

You may need to log on to access these tools and don’t hesitate to call customer service if you can’t find them.

For example, ING Direct’s Retire My Way (which also meets our IRA fund criteria) helps you plan how much you will need for retirement and whether you are on track to have that much based on your current contributions.
Action Time: 15 minutes

Either pick the lifecycle fund that is right for you or research index funds that meet your needs.
Action Time: 15 minutes

Choose a fund and buy in. Alternatively, you can earmark it if you need to save first. (You’ve gotten this far – don’t stop now!) You will receive a “fund prospectus” every time you buy a fund. These are awfully intimidating but are mandated by law to confirm that you understand the fees and risks associated with the account. Again, if you have questions call customer service. That's what they are there for!
Action Time: 5 minutes

Make a note on your calendar to rebalance/check in with your portfolio a year from now and/or to make sure a target retirement fund is in fact what you need.
Action Time: 1 minutes