That means building a secure nest egg by supplementing Social Security and a pension. But Christensen, the financial planner, points out that many people may have other goals or future financial obligations, such as paying for their children's college education, taking early retirement to start a business, buying a vacation home or providing for a parent in old age. Knowing that and how much a family or individual is able to set aside for investing each year and for how many years will help in drawing up an investment strategy. Or it may provide a dose of reality that requires lowering sights and adjusting objectives. After all, not all investments are created equal.
History has to be the guide here, financial advisers say.
And over the long run, common stocks have proven to be the most profitable by far. Historically, you are compensated for taking the most risk. Investing in small companies is the riskiest, followed by large companies, then long-term bonds. Here is the future of different hypothetical monthly investments for various time periods, assuming an annual return of 7 percent. Inflation and tax on interest can eat up virtually any gain.