Here are some of the most important strategies to follow when investing for retirement.

Invest For Growth

Even a mild rate of inflation will increase your cost of living and erode the purchasing power of your money over the years. For instance, even with only a modest 3% average annual increase in inflation, what you can buy for $1,000 today will cost you $1,344 in ten years and $1,806 in 20 years.

According to Ibbotson Associates, as measured by the Consumer Price Index the average annual rate of overall inflation since 1926 has been about 3%. That is only an annual average, however. That 77-year period included deflation between 1926 and 1933, high inflation during the 1970s that peaked at 13.3% in 1979, moderate inflation averaging about 5% a year in the 1980s, and a relatively low annual average rate of 2.9% in the 1990s.

Over the long haul, stocks have historically outperformed inflation, bonds, and other investments. That is why the standard financial advice is to invest your retirement savings in a diversified portfolio that includes both bond and stock investments.

Set Your Investment Mix

How your money is divided among the different types of savings and investments, and among the categories within these main types, depends on your age, overall financial situation, and tax bracket.

Importantly, it also depends on your financial ability to withstand losses and how much risk you need to take to meet your retirement goals. An investment professional or tools provided by your financial services firm can help you determine your specific asset allocation plan.

One thing to remember: When deciding how to divvy up your money, view all your retirement investments as part of one whole pie. For example, if you are married or part of a couple and you and your spouse or partner each have employer-sponsored retirement plans and IRAs, consider all those accounts as one whole retirement portfolio.

Save the Easy and Automatic Way

One of the best ways to invest for the long term is to save automatically through employer-sponsored retirement plans and mutual fund automatic investment plans.

In addition to helping you save regularly, these plans allow you to practice dollar-cost averaging. By investing set dollar amounts regularly, you make the best of market fluctuations because your money buys fewer shares when prices are up and more when they are down.

While this strategy does not guarantee profits or protect against losses, over the long run it lowers your average investment cost and increases the potential for higher returns.

Investing regularly also helps you steer clear of the pitfalls of market timing. Trying to guess when to sell before a market downturn and when to get back in before an upswing, or when to shift money among different investments, is a game even the pros seldom win.

Evaluate Your Investments

Once you have set your target asset allocation, review information about each of your investments, including mutual fund prospectuses, fund annual reports, and independent research analysis.

With this information at-hand, evaluate how your investments are performing by comparing returns to their appropriate benchmarks. For example, measure how U.S. large-company stock mutual funds are performing compared to similar type funds and the Standard & Poor's 500 Index, and compare U.S. small-stock mutual funds to funds in the same class and the Russell 2000 Index.

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Dover Federal Credit Union is an Equal Opportunity-Affirmative Action employer.