Investing: let's break it down
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Retirement planning doesn’t have to be overwhelming

Not everyone is an expert in financial planning. Not everyone understands how a retirement plan works. Heck, a lot people don’t know what a fund is and get nervous when they hear terms like “investment” and “asset allocation”. So if you’re one of these people, you’re not alone.

The good news is, you don’t have to be an expert in all that stuff to plan for the retirement you want. Nationwide has retirement specialists who eat, sleep, and breathe this stuff and they know it forwards and backwards. They’re the people you can count on to help you make sense of everything and get you started with your retirement plan. All you have to do is ask. Really.

But it can also be helpful to understand some basic information. So here are a few important points to help you become more comfortable with your retirement planning.

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Simply put, an investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future1.

Your retirement plan has a list of mutual funds, or funds for short. The funds are investments and you get to choose the ones you want to put your money in.

1 investopedia.com, April 1, 2015.

The idea of investing makes a lot of people nervous. Go figure. Between online newsfeeds, tweets and posts you hear about every rise and fall in the market — but may have no clue what to do — if anything. It’s no wonder the entire concept of investing can feel overwhelming.

But here’s the rub. Investing should be an important part of your personal savings plan. It doesn’t matter what you’re saving for, if you want to grow your money over the long term, investing is key. And speaking of long-term, retirement is definitely a long-term savings goal. And your retirement plan benefit (also known as a deferred compensation plan because you’re putting some of your income away for later) is an easy investment vehicle to help you save for retirement.

So what are the benefits of your deferred compensation plan? Well participation is:

  • Convenient — Contributions are automatically deducted from your pay
  • Easy for saving — Contribute as little as $25 per paycheck
  • Flexible — Make changes whenever you want (subject to federal regulations)
  • Accessible — Manage your account 24/7/365 at nrsforu.com
  • Low cost — As a governmental program, the Plan has no profit incentive

Start putting your money to work for you and watch it grow. Enroll in your retirement plan today.*

*Investing involves market risk, including possible loss of principal. There is no guarantee that any investment strategy will generate a profit or avoid losses. Actual results will vary, depending on your investment and market experience.

We get it, it’s hard to imagine yourself in retirement. After all, you’re still young. But that’s precisely why you need to start saving now. Your money has more time to earn even more money. It can do this because of something called compound interest. With compound interest, you not only earn interest on what you invest each month, but you potentially earn interest on that interest, as well. It’s almost like you’re getting free money.

Check out this example
deferred compensation and income based on contribution

Fun Fact: Because of tax benefits, when you defer or put money in your retirement plan account, the impact to your take home pay is actually less. For example, when you deposit $100 into your account, your take-home pay is actually reduced by only $75. This means you can save more but not feel the hit. #winning.

This hypothetical illustration shows how much different deferral amounts per biweekly paycheck for 25 years could accumulate, given an 8% annual rate of return for an investor. The teal sections show how much is actually contributed, the green shows how much could be earned on top of those deferrals in that 25-year period, and the amounts at the top show the total balance after 25 years. This example is not a yield projection for any specific investment. If fees, taxes, and expenses were reflected, the return would be less.

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If you’ve got questions about this concept and how your money can make more money, talk with a Nationwide Retirement Specialist today.

* 25% tax rate

In general, when you invest, you can invest in publicly traded companies — buying stocks — or loan your money to an entity with the promise they will pay you back with interest in a pre-determined amount of time — a bond.

But what if you don’t want to choose between stocks and bonds or don’t know which exactly to choose. The solution to that is called a mutual fund. Mutual funds allow you to pool your money together with other investors to purchase a collection of stocks, bonds, or other investment types. Mutual funds are the most common type of investment option offered in a retirement plan.

In the mutual fund world, it’s helpful to understand a few simple definitions so you can better understand your options.

Market capitalization is the value of a company that is traded on the stock market. That’s pretty easy to remember.

Small cap funds (cap is short for capitalization) invest in companies with market capitalization less the $2 Billion. These are the riskier of the three types because their value is more volatile, meaning the value will go up and down more frequently and with bigger up/down monetary swings. These are generally smaller companies who are trying to get themselves established and work out their kinks. So the upside is that they offer more room for growth. As the stock price rises so does the value of your investments.

Mid cap funds invest in companies with market capitalization between $2 Billion and $10 billion. These funds are at mid-level of risk (or volatility) but tend to offer more growth potential than large caps.

Large cap funds invest in companies with market capitalization over $10 billion. These funds tend to be more stable and have less volatility in their prices and are therefore considered less risky.

So, what funds are right for you?

Well, for starters, you need to determine your risk tolerance. This just means how comfortable you are with frequent or large ups and downs in the market. And the My Investment Planner tool is an easy-peasy way to do that. Then, once you know your risk tolerance, look for funds within your retirement plan’s fund list (some call it a line-up) that are within that part of the risk spectrum. Bet you thought it was more complicated than that, huh?

Now there is one more smart step to take. Review the fund fact sheet(s). You wouldn’t choose a bank without some level of information about their services and fees, right? Same thing here. Know who is handling your investment, how they manage it, the fees and more. That’s what a fund fact sheet tells you. We break it down for you here. It’s pretty easy.

Risk Spectrum

risk spectrum of risk/reward


blue chat iconTo learn more about your investment line-up or discuss risk tolerance, talk with a Nationwide Retirement Specialist today.

One of the most popular explanations of the origin of bull and bear markets is based on how the two animals attack.

When a bull attacks, it lowers its head, and uses its horns to thrust its opponent up in the air. So, a bull market signifies a climbing market.

On the other hand, when a bear attacks, it swipes its massive paws downward on its opponent. So, a bear market is one that is in decline.

Quick Tip: The best time to buy more stock or invest more is in a bear market because prices are lower. It’s like a sweet sale because you know at some point the price will rise (hopefully) and you’ll make even more money.

For more information, let’s talk.

Odds are, you still have a boatload of questions. That’s okay. Questions are a good thing. So, don’t be shy about asking them. Our Retirement Specialists can answer your questions and they won’t try to snow you with complicated terminology. Plus there is no charge for a conversation. They can help you:

  • Enroll in your Deferred Compensation Plan
  • Understand how much risk you’re comfortable taking
  • Understand what that means for your investment selection
  • Change your contribution amount
  • and more

blue chat iconMake it a point to talk to a Nationwide Retirement Specialist. You’ll be glad you did.
They want to help you reach your financial goals.

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