Setting a financial goal for your retirement investment strategy should be your first step. To help you accomplish this goal, consider the following questions:

1. How long will it be until you need the money to start producing an income for you? This is your time horizon.
2. How comfortable are you with the day-to-day ups and downs in the value of your retirement savings? This is your risk tolerance.
3. Do you know how fast you want your money to grow? This is called rate of return.
4. Do you know the risks and opportunities associated with different investments? This is investment knowledge.
5. How regularly do you plan on contributing to your retirement plan?

The investment strategy you develop to reach your retirement goal depends on the answer to all five questions, but your tolerance for risk is the most important factor in determining which investments you choose.

One of your basic objectives should be to achieve a long-term rate of return that is at least 3% above the long-term inflation rate. Keep this in mind as you think about your retirement goals.