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Stage 1: Mid-career
A plan for every stage: While you're still mid-career, start saving aggressively for your retirement
October 11, 2005: 7:17 AM EDT
By the editors of MONEY Magazine
Mid-career suggested asset allocation
Mid-career suggested asset allocation
The dream retirement

AND...
MONEY's best places to retire

NEW YORK (MONEY Magazine) - Some aggressive moves at the beginning of the saving process can pay off handsomely later on. In short, you have the time to make a mistake -- and correct it.

Goal: Maximize wealth

When you're still more than 10 years from retirement, you should focus your attention on bulking up your savings. Aim to set aside at least 10 percent of your gross salary -- though if you're just getting started, you may need to save more. At this stage, you have time to make up for market downturns, so you should take reasonable risks to get higher returns.

Challenge: Keep returns high

There will be market setbacks, but don't let them divert you from an aggressive strategy that relies heavily on stocks. If you play it too safe this early in your life, you may find yourself at the doorstep of retirement with too little in savings

Strategy: Go for growth

In this phase, it's pedal to the metal all the way. True, keeping 86 percent of your retirement money in stock funds has its risks -- in 1974, such a portfolio would have dropped 24 percent.

But a computer analysis of thousands of different market scenarios suggests that putting 86 percent in a mix of stock funds and 14 percent in a mix of bond funds would give you an even chance at double-digit gains over the next 10 years.

Smart move: Start an automatic investing plan

Direct a mutual fund company to transfer, say, $100 or more from your checking account to a fund each month. That way you can't procrastinate or "forget" to save, and your retirement fund will grow.

Another approach: Target-date funds Each of these single funds roughly follows the broad asset mix recommended in the table below. T. Rowe Price Retirement 2025 (Research), Vanguard Target Retirement 2035 (Research) and Fidelity Freedom 2040 (Research).  Top of page

The high-growth portfolio
Build a mix of index funds or actively managed funds from the six categories below.
Fund
category
% of
portfolio
Index fund (ticker) Actively managed fund (ticker)
Large-cap stock 55% Fidelity Spartan 500 Index (FSMKX) Mosaic Investors (MINVX)
Midcap stock 9% Vanguard Mid Cap Index (VIMSX) Meridian Value (MVALX)
Small-cap stock 8% Vanguard Small Cap Index (NAESX) Royce Pennsylvania Mutual (PENNX)
Intl. stock 14% Fidelity Spartan Intl. Index (FSIIX) Artisan International (ARTIX)
High-grade bond 7% Vanguard Tot. Bond Mkt. Index (VBMFX) Dodge & Cox Income(DODIX)
High-yield bond 7% Payden High Income (PYHRX)* Payden High Income (PYHRX)
*Actively-managed fund; no index fund available in this category.

Stage 2: Pre-retirement »»

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More on MONEY Magazine's special report, The Dream Retirement »».

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