Let's fast-forward into your future. You're 67 and healthy. You retired a month ago full of thoughts about all the things you could do now that you have time to do them.
You rip into envelopes containing your first Social Security check and the first payment from your 401(k) retirement fund.
Whoa! Your spirits drop like a hot-air balloon when the fire goes out. You realize you're going to spend the rest of your life pinching pennies and scrounging to make ends meet.
With some planning you can avoid things turning out that way. "Procrastination is the biggest reason people don't meet their goals," said Josephine Turner, extension economist at Auburn University. "Procrastination is the real hazard to your financial health."
The most common way to increase money available for retirement is through investments.
There are many specific kinds of investments, but basically they fall into two categories, according to Lori Holloway, a personal financial planner with IDS in Opelika, Ala. Loanership investments are those where you lend your money to an agency (usually a bank, corporation or an insurance company) and that agency pays back your principal with interest. This includes investments such as certificates of deposit, money market accounts, annuities and bonds.
An ownership investment is one where you buy the asset and own it. The amount of return you receive from the asset fluctuates with business, market and economic conditions. This includes investments like real estate and gold and other precious metals.
Low-risk investments are usually where you start a retirement fund, Ms. Holloway said.
* In a savings account in a federally insured institution, your money is safe, accessible and earns interest.
* Money-market accounts, also available at financial institutions, are similar to savings accounts. The institution invests your money in relatively safe securities and may require minimum balances.
* Certificates of deposit usually pay a slightly higher rate of interest than savings and money-market accounts. When you invest in CDs at a financial institution, you are tying your money up for a specified length of time and have to pay a penalty if you withdraw it early.
* Money-market funds are available through brokerage firms and mutual fund companies. They earn dividends instead of interest because you are buying shares of securities. The price per share doesn't fluctuate. For every dollar you put in, you have a dollar plus dividends.
* Annuities are a tax-deferred method of investment. They are available through banks, savings and loan associations, brokerage firms and insurance companies. The two basic types are fixed annuities that pay interest and guarantee the principal and variable annuities that invest in stocks and bonds.
* Bonds are investments that repay your principal with interest if you hold them until maturity. The price of a bond fluctuates daily with interest rates. Look for high-quality bonds that are federally insured and rated A or higher by a rating service such as Moody's or Standard & Poors.
U.S. Series EE and Series HH savings bonds are popular investment vehicles, Ms. Holloway said. They are guaranteed a minimum of 6 percent interest; the interest is tax-deferred and the minimum investment is as low as $25.
U.S. Treasury securities have competitive rates and are a relatively safe investment, Ms. Holloway said. Minimum purchase ranges from $1,000 to $10,000 and they may mature in less than a year to 30 years. Interest is taxable.
Municipal bonds are guaranteed by the municipality issuing them. Minimum investment is usually $1,000. They may be purchased through brokerage firms and in mutual funds.
Corporate bonds are an investment in a corporation and are guaranteed by the corporation. If the corporation goes bankrupt, you might lose your money. Minimum investment is $1,000.