Choose a mix of investment options best suited to your risk tolerance and time horizon.
If there were no such thing as inflation, preparing for a comfortable retirement might be as easy as setting money aside each month in a savings account. Unfortunately, it's not that easy. Over time, inflation is often higher than the returns on a savings account.
Even at the historically low inflation rate of 3%, the annual cost of living will almost double in only 20 years. However, the impact of inflation is most noticeable in everyday consumer goods. Assuming a 3% inflation rate, everything from stamps to cars will cost much more in 20 years.
Living Expenses at a 3% Inflation Rate
Impact of Inflation in 20 Years
at an assumed 3% inflation rate
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| |
2007 |
In 20 Years |
| A stamp |
$0.39 |
$0.67 |
| A movie ticket |
$7.50 |
$13.55 |
| Automobile |
$19,175 |
$34,632 |
Sources: U.S. Postal Service; Financial Fitness Foundation; U.S. Census Bureau's Statistical Abstract of the United States; Kelley Blue Book and; The Wall Street Journal
Investing - not simply saving - is more likely to help you beat the impact of inflation and build the retirement income you'll need. The key to investing is to establish and follow a sound strategy. Most financial professionals say the biggest mistake investors make is not having a strategy.
Getting Assistance
Need more information regarding your investment options?
Each provider has representatives available to meet with you to provide you with the tools and information you need to help you put together your retirement portfolio. In addition, many provider web sites offer online planning tools to help you manage and track your portfolio.
For a list of representatives for your institution, log onto
UTRetirement Manager and click on the applicable plan under the Online Information column through the Enroll/Change tab. You will find a link to the provider list and representative names there. To schedule a consultation, contact your provider directly.
Investment Options
The six approved Providers each offer a wide variety of investment products. UT System has categorized your options into tiers below. Not all providers offer investments in each tier. Specific investment product information can be found in the provider summary sheets. (courtesy of the UT System)
Please refer to this important document about asset allocation investments.
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Tier 1: Asset allocation or lifecycle options
These funds are designed for investors who want a simple yet diversified approach to investing. They are professionally managed funds that automatically rebalance according to their investment objective. Lifecycle funds are rebalanced according to a target retirement date; asset allocation funds are rebalanced based on risk objectives.
Consider the investment objective, risks, charges and expenses of the variable product carefully before investing. The prospectus contains this and other information about the investment. A prospectus is available by calling 800-4Lincoln *T or by visiting
www.LFG.com. Read it carefully before investing or sending money.
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Tier 2: Core investment options
This tier includes a limited menu of investments that represent mutual funds primarily invested in the three major asset classes (stocks, bonds, and short-term investments). You may want to consider these options if you are comfortable diversifying your investments on your own or with the assistance of an investment or financial advisor and/or asset allocation tools.
Consider the investment objective, risks, charges and expenses of the variable product carefully before investing. The prospectus contains this and other information about the investment. A prospectus is available by calling 800-4Lincoln *T or by visiting www.LFG.com. Read it carefully before investing or sending money.
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Tier 3: Expanded Options
This tier includes a much larger menu of additional investment options for more sophisticated investors. You may want to consider this approach if you are very comfortable managing your own portfolio or have an investment or financial advisor managing your portfolio, and understand how to research, evaluate and monitor a wide variety of investments with different risk and return characteristics.
Consider the investment objective, risks, charges and expenses of the variable product carefully before investing. The prospectus contains this and other information about the investment. A prospectus is available by calling 800-4Lincoln *T or by visiting www.LFG.com. Read it carefully before investing or sending money.
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Annuity Options
Some Providers also offer fixed and/or variable annuity products. An annuity is a contract with an insurance company enabling you to accumulate contributions in a separate account under which you can select from a variety of investment options including mutual funds and guaranteed fixed interest accounts. An annuity also provides the option for you to receive a regular series of income payments for a specified period or for life in return for your contributions.
Consider the investment objective, risks, charges and expenses of the variable product carefully before investing. The prospectus contains this and other information about the investment. A prospectus is available by calling 800-4Lincoln *T or by visiting www.LFG.com. Read it carefully before investing or sending money.
Asset Classes
Additionally, various asset classes are available within each of these tiers. The following chart illustrates the potential risk and return of the primary asset classes. As you move upward toward the highest level of the chart, the investment options within each asset class provide you with an increasing opportunity for higher returns. However, with greater return potential comes greater risk.
An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
Bond funds are less volatile than stock funds, but experience higher volatility and increased credit risk when compared to other fixed income investments.
High yield bonds experience higher volatility and increased credit risk when compared to other fixed income investments.
Funds that diversify across asset classes generally have the same, but reduced, risks relative to the underlying asset classes.
Small-cap stocks may be riskier than stocks from more established companies. Small-cap investments may not be readily converted into cash. This may affect their value so that shares, when redeemed, may be worth more or less than what they originally cost.
International investing involves special risks not found in domestic investing, including increased political, social, economic and currency instability.
Shares, when redeemed, may be worth more or less than the original amount invested.
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