You’ve decide to invest for retirement as one of your goals for 2012 and you’re ready to get started. How do you start though? Do you need to make a huge amount of income or do you need an expensive financial adviser to help you?

The good news you can start today and you don’t need a lot of money to do it. What you do need is a investing strategy and a plan. I’ll show you how to do both and I’ll include some low cost, low minimum investments to help you save for retirement.

Investment Strategy

Having a strategy in mind can help you achieve or even exceed your goals, whether it’s with investing or with your income.  There are a ton of financial calculators out there to help you figure out how much you need to have at retirement.

You’re just looking for some ballpark figure. The idea is that you have a goal to work towards. It’s ok if the number is a little bit off – you can always adjust it. We’re just interested in getting you started. Besides at best these are estimates, you have no idea what will happen down the road. Don’t be paralyzed by perfection.

Now that you have a number in mind you also have to get an idea of when you’d like to retire. Again, life happens so don’t sweat about the exact number, we’re just trying to put together a general timeline to have a place to begin.

Asset Allocation – Minimize Risk, Maximize Returns

Ok, you decided when you want to retire and how much you’d like to have each year during your ‘golden years’. Now you have to decide on your asset allocation. Basically you should think of asset allocation as a helpful way for you to reach your target without putting your money at too much risk.

Since risk is subjective (some people are more aggressive with investing then others) your investments will vary from your friends or coworkers. That’s fine. You want to be able to sleep at night and not anxiously follow the stock market every minute you’re awake.

Investing Plan

Now that you’ve created your goals for invest, it’s time to create an investing plan to help you achieve them.

You’ll need to look at your budget and see how much you can contribute. If your job offers a 401(k), then you can start small with just 5% contribution. If you get a match from the company that’s a great bonus, but if not, you till get a tax break.  Starting small and building your contributions everything you get a raise can help you speed up growing your portfolio.

If you plan on investing with your IRA you’ll have more freedom with choosing your investments. Don’t worry if  you’re low on cash right now, that doesn’t mean you have to wait before you invest.

In fact, here are 5 index funds that have a minimum requirement of $250 or less to open:

  • Schwab S&P 500 Index Fund (SWPPX)
  • Schwab Total Stock Market Index Fund (SWTSX)
  • Schwab 1000 Index Fund®(SNXFX)
  • Schwab Small-Cap Index Fund®(SWSSX)
  • Schwab International Index Fund®(SWISX)

From personal experience the best way to keep on track is by automating your contributions. How much should you contribute? That’s up to you, but at the very least you should try to go with $100/month. Schedule contributions the day after your paycheck is deposited and you’ll be more likely to keep to your system.

Thoughts on Investing

The good news is even if you start of contributing small, with some time you’ll build your net worth and investments. Having a system and sticking to it can do wonders for your accounts’ balances.

How many of you are investing (not just for retirement)? What’s your investment strategy? If you’re just getting started, don’t forget to check out my post last week on investing basics. I share some great resources on how to create a basic invest portfolio for your retirement.

Photo Credit: shanti

Laura Martinez

Laura Martinez