Specifically, invest in index funds and “basic” balanced funds (low management fees).
Include international stocks and bonds in your portfolio.
Some portion of your portfolio should be in cash as well (e.g. T-bills, money market accounts, CDs, etc.).
Moreover, you should consider including real estate in your investment portfolio (increased diversification).
Do not make investment decisions driven primary by taxes, but understand the tax implications.
Take advantage of all opportunities to save for retirement.
Appendix: Comparing Plans 21 Yes Varies Low to high Low to high Perpetuities Stocks No federal $5,000 Moderate Some 1–20 years Municipal Varies (Std vs. Roth) Varies Low to high Low to high When buyer is 59.5 years old Retirement Funds Usually Varies Low to high Low to high Varies Mutual Funds Federal only $1,000 Moderate None 10–30 years Bonds Federal only $1,000 Moderate None 1–10 years Notes Federal only $10,000 Moderate None 1 year or less Bills U.S. Treasury Yes $1,000 Moderate Some 5–30 years Corporate Bonds Yes Varies Moderate None if insured 90 days or more CD Yes $5 Low None if insured Immediate Savings Account taxable? minimum $ yield risk maturity instrument