Inside Iowa State
Nov. 10, 1995


Retirement Advising Office: Your Retirement Savings Strategy 

There are two basic strategies to saving successfully for 
retirement: pay yourself first, and save regularly. As an ISU 
employee, you already are doing this and the university is 
double matching what you do.

The speed at which your retirement savings compound relies on 
numerous factors, most of which you control. Ask yourself the 
following questions:
--How much are you contributing?
--Can you contribute more?
--How do you allocate your contributions?
--Have you reviewed these allocations recently?
--Are you aware that the TIAA and CREF accounts will grow at 
different rates?

Let's address the last question. The "Rule of 72" can help 
you determine if the rate earned by an investment is high 
enough to enable you to reach your savings goal. Here's how 
it works: Divide the number 72 by a given interest or growth 
rate. The result is the number of years it takes for your 
money to double.

For example, funds earning 9 percent will double in eight 
years. Another way to use the "Rule of 72" is to divide 72 by 
the number of years in which you want to reach a  savings 
goal. The result will give you an idea of how high an 
investment return you should attempt to secure.

History tells us that certain CREF accounts have grown at 10 
percent or more and that currently, if interest rates don't 
rise, the TIAA traditional account may not grow at a rate 
greater than 7 percent.

How does this rule affect you if you have all your 
contributions in TIAA's traditional account? If you are age 
35 and want to stop working at age 70, you'll need to 
contribute $580 monthly to your TIAA account to accumulate 
$243,600 in your retirement account. 

If you start saving at age 40, with a retirement goal of age 
70, you will need to save $850 each month to achieve a 
$306,000 goal. Whether your goal is $243,600 or $306,000, 
reallocating some of your funds to some of the CREF accounts 
could help you more easily achieve your goal by age 70.

The Retirement Advising Office, 4-3830, can help you review 
your current allocations and give you literature that assists 
you in developing your long- or short-term retirement savings 
strategy.

__________
Source: Ann Molison, Retirement Advising Office (515) 294-
3830