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Saving for Retirement

With 18 Years to Go

Time is on your side. Save often and aggressively to outpace inflation.

With nearly two decades to go and college inflation ticking away at 5% a year, the bills skyrocket -- but the power of compounding over that time can make even the priciest schools affordable. The best strategy at this point is one that almost no one who doesn't regularly utter the words trust fund can put into action: Put aside a lump sum and watch it grow. With 18 years to invest at a total return of 10% a year, you'd need about $41,000 to finance a private-college education and about $20,000 for public college.

Almost as unrealistic as finding such a windfall is saving $100 to $300 a month uninterrupted for 18 years. Only a few superdisciplined families are able to do it. "Extra" cash is likely to be diverted to day care or a down payment on a house, or your income may drop while you stay home with the children.

Solution: Invest as much as you can each month, then add lump sums when you get a raise, bonus, tax refund or gift.

You have more than enough time to invest aggressively. The stock market will have its ups and downs, but it has always gone up over the long run (large-company stocks have gained an average of 11% per year over the past 72 years). Invest all your savings in stocks or stock mutual funds, with about 75% in domestic-stock funds and 25% in foreign funds.


Smart Strategies
With Ten Years to Go