Northwestern Mutual

Saving and Investing Strategies

Help build and protect your retirement nest egg through diversification.

To make the most of the money you're setting aside for retirement, consider these sound saving and investing strategies:

Establish a budget and a habit of saving.

To reach any financial goal, you need to understand how much is coming in and how much is going out each month. The goal should always be to have positive cash flow, meaning you spend less than you earn and you have money left at the end of each month.

To get a better handle on your cash flow, take an honest inventory of all the ways you're spending money. Then, once you have an idea of where your money is going, develop a realistic monthly budget that accounts for every expense you have and sets aside at least 20 percent of your income for saving and investing.

Consider a mix of saving and investing solutions.

As you save for retirement, where you put your money could have a big impact on how much you'll have to enjoy. By investing in a mix of retirement assets now, you'll have more options when you’re actually in retirement to combine streams of income in a way that minimizes taxes and reduces the risk that you'll outlive your investments. Some of the most common sources of retirement income include:

What's your plan to save for your retirement? Add flexibility to your retirement savings with a variable annuity
  • Deferred annuities
    Deferred annuities allow you to accumulate retirement funds on a tax-deferred basis and then turn them into a stream of lifetime income during retirement.
  • Non-qualified investments
    There is no limit to the number of investments you can make in stocks, bonds and mutual funds outside of a traditional retirement account.
  • 401(k)
    With a defined-contribution plan through your employer, you can make pretax contributions that reduce your taxable income today. Your employer may also make contributions, and earnings on both employee and employer contributions grow on a tax-deferred basis. You aren't taxed on the money until you take it out of the retirement account.
  • Traditional IRAs
    Contributions to a traditional Individual Retirement Account (IRA) may be tax deductible, depending on your income and whether you also participate in an employer-sponsored retirement plan. Similar to 401(k)s, earnings in a traditional IRA grow tax deferred.
  • Roth IRAs
    Contributions are made to a Roth are after tax, so they will not reduce your taxable income today. However, your money grows tax free, and distributions from your Roth are generally tax free during retirement. This is a good option for those who feel they will be in a higher tax bracket when they retire.
  • Roth 401(k)
    A Roth 401(k) carries all of the characteristics (tax-free growth and tax-free distributions) of a Roth IRA except for income limits. Unlike a traditional Roth IRA, the Roth 401(k) has no income limits for contributions. In order to participate, your employer must offer this benefit.
  • Permanent life insurance
    Permanent life insurance provides lifetime protection of your assets through a death benefit to your survivors. The policy also accumulates cash value1 that can be utilized to help pay for emergency needs or to help supplement retirement income.

You can employ a number of vehicles for your retirement savings, and there are many considerations for each choice. The key is to ensure that your retirement savings strategy is part of a comprehensive plan that accounts for your short-, mid- and long-term goals.

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