"Money File"-Effortless Ways To Save
Wednesday, October 25, 2006SUSIE GHARIB: In the "money file" tonight, taking the easy way out when it comes to making hard decisions about your finances. Here's Eric Schurenberg, managing editor of "Money" magazine.
ERIC SCHURENBERG, MANAGING EDITOR, MONEY MAGAZINE: If you wanted, you could spend every spare hour managing your money. But actually, for most of your big goals there is a decent shortcut. It's not a customized solution, but it will work and it's much, much better than doing nothing, which, let's face it, is really the alternative.
Take retirement. You could give yourself migraines over investment strategies or you could just buy a target date fund in your 401(k). In a 401(k) the money comes automatically out of your paycheck, so saving is effortless. And target-date funds are the ultimate one-decision investment. Just pick the one named after the year you plan to retire. You'll get a portfolio appropriate to your age that automatically adjusts as you close in on retirement. You don't have to do a thing. You'll get returns at least equal to what you'd get on your own, when you'd have to remember to save and create a portfolio and adjust it every year. This is one time simpler isn't just easier. It's better.
Or how about education costs? You know, 529 plans are a smart way to save for college, but you may not know if the one offered by your state is any good. The shortcut: go straight to the Utah educational savings plan. It offers good, low-cost mutual funds. You can set it up to draw money automatically from your bank account every month, and you can use it to pay college costs in any state. With one call, you'll put your kids' college fund in good hands and you can go back to helping your future scholar do her homework. I'm Eric Schurenberg.
