Retirement, Investments, & Insurance for Individuals Build your knowledge What’s in my retirement plan, and can I expand my investment options?

What’s in my retirement plan, and can I expand my investment options?

Find out more about the investment options in your retirement plan and how to help your savings support your long-term goals.

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5 min read |

There are many ways to save for retirement. What works for you depends on your unique circumstances and goals.

What type of retirement plan should you get?

Some people build individual retirement accounts (IRAs or Roth IRAs). Others rely on retirement plans provided through a workplace that may include 403(b)s, 401(k)s, and IRAs. Some do both. No matter how you save, it’s important to understand your investment options.

“Your plan for retirement should be designed to meet your needs and wants in the long term,” says Heather Winston, a financial professional and product director with Principal® . “But more than that, your plan for retirement is uniquely yours.”

“Your plan for retirement is uniquely yours.”

Heather Winston, financial professional and product director

Mapping it all out can be intimidating—but doesn’t have to be. Here are ideas to help you build your personal retirement plan.

Do I need a retirement account—or more than one?

You want as many ways to save and plan for retirement as feasible to help you reach your goals. That’s why experts advocate for diversity in savings products, which in turn can provide diversity in retirement income.

“To work towards your retirement dreams, invest as much as you can, as long as you can, in as many ways as you can,” Winston says.

Social Security in retirement is one piece. But it may not provide enough income after you’re done working to support your lifestyle. A retirement income option such as an annuity can offer guaranteed monthly income. Or an IRA can grow over time and help round out your potential retirement income. (Get help figuring out the income you may need with our Retirement Wellness Planner.)

Where should I put my retirement money?

Money that you save in both 401(k)s and IRAs can be allocated to a variety of investment options. These investments typically represent different parts of the market, called asset classes. There are two main asset classes: fixed income and equities.

  Fixed income Equity funds

In general:

Typically more stability over time Typically more growth with more risk

What they are:

Purchasing a bond is like loaning a company (or the government) money and, in return, receiving a rate of return. Growth engine of an investment portfolio made up of company stock shares

Made up of:

Bonds and other investments: income through regular interest payment

Short-term funds: includes CDs (typically FDIC insured, unlike other investments), lower interest rates

Longer-term funds: higher interest rates but more risk, such as loan default
When you own stock, you own a little piece of a company, entitling you to a share of company profits and potentially dividends.

Important to know:

While less volatile than equity, it may offer less growth. Can lose value, including principal amount invested. More growth potential also equals more volatility and risk. Can lose value, including principal amount invested.

Why have different investment options for retirement?

Because not all investments move up (or down) in tandem, diversification matters. That may mean owning both fixed income and equity investments, domestic and international investments, big and small companies, and short- and long-term bonds. Over time, diversification may help your portfolio grow steadily without as many wild swings up or down.

In other words, diversification may enable a smoother ride into and through retirement.

What type of retirement investments should I consider?

Depends on the account. In a 401(k), for example, the investment options typically are determined by the plan sponsor—meaning the employer or group that sets up the retirement account. In an IRA, you get to decide where and how your IRA is opened and invested. You typically have options to delegate the ongoing management of those assets to a separate investment manager in both of those accounts.

You can decide for yourself which direction to go. But it also may feel overwhelming to pick various stocks or bonds and allocate a percentage to each. Keep in mind that you also have many ways to access resources and people to help you navigate all these choices.

What if I don’t really want to spend a lot of time choosing among investment options?

That’s OK. In fact, many employer-sponsored plans and IRAs allow you to pick a portfolio based on a target date or by how much risk you want to take. Then you can check your accounts periodically and adjust if needed. Portfolios like these are typically structured in one of two ways:

  • A target date approach: This lets you pick a date—generally based on your age at normal retirement. The target date fund is set up to adjust the investment mix to generally become less risky as you near retirement. For example, you may take more risk today if your retirement date is 20 years away.
  • A target risk approach: The mix of investments in these funds, in contrast, is tied to a specific risk category. Some take more risk (and use more equities) and some take less risk (with more fixed income). If your risk tolerance changes, you can change your fund, too.

What's next?

Connect with your financial professional to see if you should make any changes to your investment mix based on your goals or current situation. If you don’t already have a financial professional, we can help you find one.