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Americans, we have saved $21.7 trillion for retirement in our 401(k) accounts, IRAs and pensions, says AARP. It’s a humongous amount. Just one problem: Experts say it’s nowhere near enough.

No wonder funding your own retirement is intimidating. And many of us feel unprepared for, or are frightened by, the task of managing our money, making the job doubly difficult. And yet, for a great many people, there’s no choice. Like it or not, our ability to live comfortably in old age is up to us. Our futures depend on what we do today and tomorrow.

If you want to dive deeply into it, retirement saving and investing can be complex. But most of us aren’t interested in becoming experts.

Step 1: Decide What to Put in Stocks

Over time, stocks have produced higher returns (although, as financial product ads warn, past performance doesn’t predict future results). Retirement savers often invest in stocks by buying stock mutual funds.

Investors sometimes use rules of thumb to decide how much of their portfolio to put in stocks. Money Talks News founder Stacy Johnson favors this formula:

  • Subtract your age from 100.
  • Invest the remaining percentage in stocks.

How it works: If you’re 45, subtract 45 from 100, which leaves 55. Invest 55% of your portfolio in stocks.

Some experts think the mix should change now that Americans are facing longer retirements. CNN Money’s Ultimate Guide to Retirement says:

However, with Americans living longer and longer, many financial planners are now recommending that the rule should be closer to 110 or 120 minus your age. That’s because if you need to make your money last longer, you’ll need the extra growth that stocks can provide.

How it works: If you’re 45, subtract 45 from 110, leaving 65. Invest 65% of your portfolio in stocks. Or, subtract 45 from 120, leaving 75, and put 75% of your portfolio in stocks.

Step 2: Find Your Tolerance for Risk

Stocks offer a better chance of growing your money, but they also involve more risk. The stock market took a nose dive this fall. The Standard & Poor’s 500 Index recovered much of its previous value, but the stock market is near a record high and could drop again.

“We’re long overdue for a pullback of 10 percent or more, known as a correction,” Stacy wrote recently, explaining why prices fell and how to respond.

Here’s the puzzle retirement savers face: If you keep all of your money in cash or low-risk investments, you’ll earn practically nothing. You may even lose money to inflation. More risk can mean a chance for higher returns.

Understanding your tolerance for risk helps you decide how to invest and lets you sleep well at night. To explore your investment risk tolerance, use the Rutgers University Cooperative Extension investment risk questionnaire.

The proportion of your savings you put in stocks is up to you and your comfort level with risk. Not everyone uses the formulas above. They’re just a place to start. For some investors, putting half or more of your savings in stocks feels too risky. If that’s you, don’t do it.

Step 3: Pick a Stock Fund

Many investors prefer a simple way to invest: They buy shares of index funds, which are often managed by computers. These mimic the performance of a particular group of stocks or bonds. The Vanguard 500 Index Fund, for example, mimics the performance of Standard & Poor’s 500 stock index. Index funds are cheaper to own than managed funds (managed by human experts, that is) and their track record is often at least as good.

The New York Times cites a series of annual S&P Dow Jones studies that found “that over extended periods, the average actively managed fund lags the average index fund.” Some active managers do better than index funds, but it’s hard for most of them to maintain that edge over time, the Times says.

Index fund balances soared in spring 2014 when legendary investor Warren Buffett disclosed publicly that he wants most of his money put in a stock index fund after he dies. The Wall Street Journal says:

The billionaire wrote in his closely watched letter to shareholders of his company, Berkshire Hathaway Inc., that he believed most people would be well-served by following the investing instructions in his will.

Mr. Buffett, 83 years old and with a net worth of $66 billion, wrote that he advised his trustee to “put 10 percent of the cash in short-term government bonds and 90 percent in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.)”

Step 4: Diversify

A carefully chosen diverse set of investments helps you protect against or at least soften losses from stocks. The U.S. Securities and Exchange Commission says:

The practice of spreading money among different investments to reduce risk is known as diversification. By picking the right group of investments, you may be able to limit your losses and reduce the fluctuations of investment returns without sacrificing too much potential gain.

Stacy’s approach is to balance stock market investments with two relatively safer investment types: cash and bonds.

Step 5: Invest the Rest

For the remainder of your portfolio after your stock market investments, Stacy suggests dividing it, putting half into a low-cost intermediate bond fund and the rest into a money market deposit account or other insured fund.

Bonds pay considerably lower returns than stocks over time, but they are typically safer. Investors traditionally have purchased bonds to keep a portion of their money in a safe haven in case stock prices fall, bacause bonds often increase in value when stocks fall.

Bond index funds often are less expensive to own. “With bond funds, the case for indexing is especially compelling, since your potential returns are lower than for stocks, and the higher fees you pay to have a human guiding your fund can easily erode your gains,” says Time.

Bank deposits and money market deposit accounts are insured by the federal government, usually up to $250,000 in losses. (Money market mutual funds, containing instruments like government bonds, Treasury bills and certificates of deposit, are not federally insured.) The Federal Deposit Insurance Corp. tells which account types are and are not government-insured.

Step 6: Know Your Investment Time Horizon

Here’s one more thing to take into account: The proportion of money you put in stocks should depend also on how soon you’ll need to use your money. That’s why the rules of thumb above take your age into account. You can tolerate more risk if you know you have 20 years to make up any losses. If you’re planning to retire and will need your money within five years, you’ll have a different approach to risk.

CNN Money’s asset allocation wizard uses your numbers to suggest a mix of investment types suited to your investment horizon and risk tolerance.

This post originally appeared on Money Talks News.

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