investing

Age-specific investment advice

2. Midcareer 

The midcareer stage offers its own set of retirement challenges. The competition for a piece of your paycheck increases when you consider other life goals such as funding college educations for your children, establishing a wedding fund, seeing a bit of the world or remodeling the den.

If you were able to put aside money for retirement in the early years of your career, you may feel less pressure to ramp up contributions midcareer. Still, this is the time to be building balances in retirement accounts. When you take a long-term perspective, it makes much more sense to be a buyer at current stock market levels than it does to sell at these levels.

After a stock market decline, insurance companies often begin heavily promoting equity indexed annuities and equity indexed CDs that promise to give investors some of the potential upside in stock market returns without any downside risk. These investments often don't deliver the returns the investor expects, in part because of limits on the upside potential and often the lack of dividend payments. In addition, these products generally come with high fees and expenses. Be cautious when considering these types of investments. The SEC publication, "Equity-Indexed Annuities," offers more information about annuities.

CD terms vary by lender. Fees are likely to be less egregious with the CD, but again, the investor needs to be cautious about the actual terms on the CD. The SEC weighs in on this investment, too, in its publication, "Equity-Linked CDs."

3. Countdown to retirement 

Conventional wisdom has you dialing down the risk in your portfolio. While it's true you don't have the years to rebuild your retirement portfolio after a substantial market decline, you still have to consider how your investments will keep pace with inflation-protecting purchasing power, as well as principal. You're likely to spend almost as much time in retirement as you will have spent in the workforce. Abandoning growth for safety of principal creates an issue down the road.

Treasury Inflation Protected Securities, or TIPS, offer a fixed coupon payment plus a return based on the inflation rate, as measured by the Consumer Price Index. The Treasury auctioned a nine-year, nine-month TIPS (a reopening of the 10-year TIPS auctioned in July) on Oct. 8 priced to yield 2.85 percent plus inflation, but there are 5-year and 20-year maturities auctioned as well. Because they aren't tax deferred, TIPS work best in tax-advantaged retirement accounts.

Series I savings bonds also offer inflation protection, along with a tax-deferral option not available on the TIPS, but currently the fixed-rate component of a Series I savings bond is zero percent. To learn more, see Bankrate's story on investments that outsmart inflation.

Also, learn more about annuities. Some inflation-indexed annuity products can deliver an inflation-adjusted income over your lifetime.

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Annuities aren't right for everyone, but it's easy to recommend against purchasing an annuity without getting an independent second opinion on the decision. Consult a fee-only financial adviser. Use Bankrate's CFP search tool to find a financial planner in your area (be sure to find out upfront how they're compensated).

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