Exchange-traded funds (ETFs) have become increasingly popular since they were introduced in the mid-1990s. Their tax efficiencies and relatively low investing costs have attracted investors who like the idea of combining the diversification of mutual funds with the trading flexibility of stocks. ETFs can fill a unique role in your portfolio, but you need to understand just how they work and the differences among the dizzying variety of ETFs now available.

Negative returns early in retirement can have a devastating long term impact. There are numerous studies on the impact of volatile market returns on your income from retirement savings. However, the sequence in which those returns happen can be the difference in barely making it through retirement or leaving a multimillion dollar legacy to your family.  Despite these studies, I still see many traditional retirement income plans that utilize a constant average rate of return in their projections. This flat, no volatility average can lead pre-retirees and retirees to believe that they face minimal or no risk in funding their retirement. These conventional retirement plans completely exclude sequence of return risk and the impact of negative years early in retirement. 

Determining how big of a nest egg you will need to generate enough retirement income is the most commonly asked question when it comes to retirement planning.  There are many rules of thumb to calculating your retirement number. I have read articles that say to calculate your retirement account size, simply take 80% of your current income and multiply it by 25.  These basic retirement goal calculations are OK, because it gives you a goal to target. However, I will give you a more targeted  6 step approach to calculating your nest egg and better set your retirement goals.

No matter how many years you are from retirement, it's essential to have some kind of game plan in place for financing it. With today's longer life expectancies, retirement can last 25 years or more, and counting on Social Security or a company pension to cover all your retirement income needs isn't a strategy you really want to rely on. As you put a plan together, watch out for these common myths.

Many people assume they can hold off saving for retirement and make up the difference later. But this can be a costly mistake. Waiting too long to start saving can make it very difficult to catch up, and only a few years can make a big difference in how much you'll accumulate. This doesn't mean there's no hope if you haven't set aside anything for retirement yet. It just makes it all the more important that you implement a plan today.

Over the past few years, mutual fund companies have flooded 401k Plans with Target-Date funds in an attempt to make portfolio selection easier for participants.  They want to provide an “easier” option to retirement savings.  For those that aren’t familiar with these investments, they are mutual funds designed to provide an “appropriate” asset allocation based on the date at which you expect to need access to your money. i.e. the day you retire.