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The Short Answer

Investment Strategies for Late-Start Retirement Saving

Four methods to help make up for lost time.

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In last week's column, I presented seven practical steps to help late-starting investors improve their chances of achieving a sizable nest egg to help with retirement needs. In this week's installment, I'll focus on a few more specific investment strategies to help you on your way toward retirement security.

1. Max out your retirement accounts.
It may seem obvious, but saving and investing larger sums of money over time is the surest way to meet your financial goals. If your employer offers a 401(k) or 403(b) plan with decent investment options, you should try to maximize your contribution to it. The maximum contribution for 2006 is $15,000, and investors over age 50 can now contribute $5,000 per year more in "catch up" contributions. If these amounts are out of reach for you, try to contribute the amount you need to take full advantage of employer-sponsored matching programs, as this can be a great way to maximize your investment.

Though focusing on your employer-sponsored retirement account is important, particularly if your company offers a match, you should not ignore your IRA options, as they'll provide you with added flexibility. Morningstar's IRA Calculator can help you determine which IRA option you are eligible for and what your maximum contribution amount will be. It is also important to know about the differences between the traditional IRA and the Roth IRA. To find out more about these two investment choices and determine which plan is best for you, click here. Additionally, you'll want to utilize the IRA's main advantage, tax-deferred (traditional IRA) or tax-free (Roth IRA) compounding, and thus maximize your total return while minimizing your tax burden. For some great advice on which investment options are best for your IRA accounts, click here.

Lawrence Jones does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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