While You're Working

It may be tempting to let immediate goals, such as buying a first home or having a child, take the place of saving for retirement. However, while these short-term events require significant savings, keeping focused on your long-term needs is still imperative. Even if you must decrease the amount you can contribute to your retirement savings accounts during this time, you can still accumulate earnings and build upon the portfolio you've already started.

One strategy for managing your varying goals is to separate your short-term investments from your long-term ones, as different types of securities are suited to different objectives. For example, growth investments such as stocks and mutual funds that invest in stocks are well suited for long-term goals, such as retirement, since you have the time to take on greater volatility risk.

For short-term goals, such as paying for a house or condo, you may want to protect your principal and stick to cash or cash equivalent investments, such as money market funds, certificates of deposit (CDs) and Treasury bills. One strategy is to buy CDs or Treasury bills with maturities that correspond to the time you expect your down payment to be due. This way, you'll have the money when you need it.