As the world’s leading AI chipmaker, Nvidia (NVDA) stands as one of the biggest winners of the artificial intelligence revolution. In 2024, the company gained $2 trillion in market value, as enterprises around the globe demand more data center capacity to support their growing need for high-performance computing. The stampede has only intensified in 2025.

But even rainmakers have vulnerabilities. Earlier this year, Nvidia lost nearly $600 billion in market value in one day — the largest single-day drop for a U.S. company — after a Chinese startup unveiled its DeepSeek AI model, which it claims requires far fewer chips than past models. The news sparked panic among investors, who worried demand for Nvidia’s chips would tank.

And as part of President Trump’s broad-reaching tariff regime, the company agreed to pay 15% of its revenues from Chinese AI chip sales to the U.S. government.

Still, Nvidia's gravity-defying growth keeps investors coming for more. The company’s revenue model is a good place to start to understand how the chipmaker gained its dominant position.

Nvidia designs and sells graphics processing units or GPUs. The company's history in this space dates to the late 1990s, when Nvidia invented the GPU for use in gaming applications. The architecture was innovative because it allowed small computations to run simultaneously rather than sequentially. The technology ushered in a new era of more realistic video game graphics.

Nvidia has since developed an ecosystem of software and computing tools around its GPUs. Developers use those tools to design and run complex, resource-intensive applications on Nvidia's hardware.

Today, those applications go well beyond gaming. The company's most significant opportunity is in the field of AI, which has been a focus for Nvidia since 2013 when CEO Jensen Huang realized that high-performance GPUs could play an instrumental role in the growing adoption of machine learning technology.

That revelation began paying off when the 2022 launch of ChatGPT took AI computing mainstream. The sudden, sweeping popularity of the AI chatbot motivated enterprises globally to launch new AI tools and related services.

The need for computing hardware that is powerful and efficient enough to support AI applications has skyrocketed. That hardware includes GPUs, tensor processing units, routers, switches, and storage solutions, among other things. These, along with software that enables AI development, are collectively called AI infrastructure. Enterprises house this infrastructure in technology facilities called data centers.

Data center infrastructure has been the primary growth source for Nvidia, but the company also serves other industries. Gaming is still a core segment, though its contribution is relatively small. The company is working to marry its expertise in AI and graphics, which could create revenue synergies. In 2024, for example, Nvidia launched “Nvidia Ace,” a suite of tools for developing interactive avatars, called "digital humans."

Nvidia hardware is also used in the automotive and robotics industries, including autonomous driving applications. Ayako Yoshioka, portfolio consulting director at independent asset manager Wealth Enhancement Group, believes autonomous driving is Nvidia's next big opportunity — although it may not come quickly. "They will be tied up in AI for some time," Yoshioka said.

Telecommunications is another segment to watch. Nvidia hardware is already used in 5G data centers. The company envisions advancing telecommunications services to support the growing needs of the AI computing revolution. Connectivity demand for robotics, driverless vehicles, smart factories, and more will increase as AI technology matures. Nvidia has also launched a research platform to support the development of 6G wireless technology.

Nvidia's customer list includes some of the world's largest companies: Alphabet (GOOG), Amazon (AMZN), Meta Platforms (META), Microsoft (MSFT), and Tesla (TSLA).

Nvidia has some noteworthy advantages that insulate it from competition. These include forward-thinking leadership, a proven ability to innovate, and a robust and proprietary platform around its hardware.

Forward-thinking leadership. Twice in Nvidia's history, Huang has identified broad market opportunities where his company could innovate and excel.

Ability to innovate. Nvidia has the expertise and resources to create new solutions to fill unmet demands. This partly relates to the company's focus on design rather than manufacturing. Nvidia is a fabless company, which means it outsources production to other companies like Taiwan Semiconductor (TSM). In early 2025, Nvidia released its new Blackwell GeForce RTX 50 Series of GPUs, which it says will transform AI computer graphics, offering faster performance and greater energy efficiency at just a fraction of the cost of the GeForce RTX 4090.

Platform strategy. Hardware sales drive revenue, but Nvidia also provides a full suite of tools and resources developers can use to build and run applications. "This tight integration of hardware, software, and developer tools creates a moat around Nvidia's offerings that is difficult for competitors to match," Tower Hills Capital founder and CIO Drayton D'Silva said.

Broad ecosystem. Though Nvidia is best known for its GPUs that are primarily used for data centers, AI and machine learning applications, and gaming, its technology is used across a huge range of industries, including healthcare research and personalized medicine, financial services, the automotive sector, and more.

Despite its strong market position and formidable advantages, Nvidia and its investors face significant risks. These include rising competition, high investor expectations, and the changing demands of a fast-paced industry.

Rising competition. Nvidia's dominant position in AI-capable chips has a downside. Nvidia competitors want their share of this growing market, and clients want more options. "There are a lot of companies, including Nvidia's own clients, that are working on custom chip design. Those clients don't want to be locked into a single chip supplier,” Yoshioka said. Several major Big Tech companies, including Amazon, Meta, and Google, are racing to develop their own AI chips to make them less dependent on outside suppliers like Nvidia. The introduction of newer AI models, like DeepSeek, could also lower demand for Nvidia chips.

Investor expectations. Investor optimism pushes the price of NVDA stock higher. If the company fails to satisfy expectations, a price correction will follow. Yoshioka recommends investors proceed with caution when expectations are high. Volatility can result when "too many investors look at Nvidia's growth and expect it to continue.”

Fast-paced industry. In 2023, Nvidia announced it would expedite its product roadmap by launching upgrades annually. The company previously followed a two-year refresh cycle. The change puts pressure on Nvidia to execute product launches flawlessly. Any delays or product failures could allow other providers like Advanced Micro Devices (AMD) to gain traction. AMD also upgrades its chips annually.

Export restrictions. Nvidia faces significant export controls on its AI chips, with especially tight restrictions on shipments to China. If the Trump administration imposes additional tariffs amid the growing U.S.-China trade war, Nvidia could face additional pressure.

Whether you are interested in trading Nvidia or another stock, understanding the business model is an essential early step in your research. With that knowledge, you can better evaluate financial performance and growth strategies to ensure the asset is right for your portfolio.

Nvidia is a company that designs GPUs, which are circuits that support high-performance computing by allowing calculations to process in parallel rather than sequentially. The company is the dominant provider of AI-capable GPUs.

Nvidia stock uses the ticker symbol NVDA. NVDA trades on the Nasdaq stock exchange and is available for purchase in U.S. brokerage accounts. A share of stock represents an ownership position in the company. As the company increases its value, the stock shares also appreciate, which benefits shareholders. A $1,000 investment in 2015 would be worth $349,960 today, according to Yahoo Finance data.

Nvidia makes money primarily through the sale of GPUs and related computing hardware and tools.

As of August 2025, Nvidia was the most valuable company in the world, with a market cap of $4.37 trillion. It’s currently followed by Microsoft and Apple.

An investing strategy aims to guide confident, effective trading decisions. Without a strategy in place, investors are more likely to overtrade, let emotions take over, or inadvertently change their risk profiles. Any of those outcomes can limit long-term growth potential.

Whether your objective is generating gains or income, having a defined approach provides the best chance of success in the stock market. Fortunately, you do not have to be an investing whiz to create a strategy that works for you.

You can develop a solid, personalized investing framework in three steps.

Learn more: How to start investing: A 6-step guide

Risk tolerance describes how much volatility you will accept within your investment portfolio. Your appetite for, or aversion to, risk should influence every aspect of your investing strategy.

Note, too, that risk and reward work together in investing. Higher-risk assets have greater growth potential, and lower-risk assets have lesser growth potential. The relative risk and reward of investing in stocks versus cash demonstrates this.

Learn more: What is a financial advisor, and what do they do?

Since risk tolerance is a foundational element of your strategy, it is wise to define it in writing. With that documentation, it should be easier to review and validate your approach periodically. If your risk appetite has not changed, your strategy is likely still on point. Or, if your defined risk tolerance no longer suits you, it is probably time for a strategy overhaul.

The simplest way to clarify your risk tolerance is to consider portfolio-decline scenarios. Could you handle a 10% dip in your investing account? What about 50%?

Your maximum capacity for unrealized losses can indicate where you fall on the risk tolerance spectrum. You incur an unrealized loss when a stock you own declines in value. Losses are realized only when you sell a stock for less than you paid for it.

Learn more: Robo-advisor: How to start investing right away

An example of what your risk tolerance spectrum might look like:

If 10% is your limit, you are risk averse.

If you can accept dips in the 20% range, you have a moderate risk appetite.

If you can accept dips of 30% or more, you are risk-tolerant.

With a higher risk tolerance, you can comfortably own stocks that have greater growth potential — stocks like Nvidia, for example. Ayako Yoshioka, portfolio consulting director at independent asset manager Wealth Enhancement Group, notes that Nvidia stock (NVDA) has gone through multiple periods when it’s down more than 50%. The stock, therefore, provides a useful thought experiment for investors. If a stock you own loses half its value, would you panic and sell or be willing to wait for a recovery?

Asset allocation is the composition of your portfolio across different types of assets. Setting asset allocation targets helps you manage risk according to your tolerance.

For example, conservative investors might target 50% exposure to stocks and 50% exposure to bonds. In this mix, the stocks provide growth potential along with volatility. The bonds provide stability in repayment value and income.

A portfolio with a higher percentage of stock could deliver larger gains but with more risk. That is why aggressive investors who can handle risk prefer heavier stock exposure, up to 90%.

You can also break your targeted stock exposure down into smaller categories, such as growth stocks, value stocks, small caps, mid-caps, large caps, and international stocks.

You might also cap your relative exposure to any single stock. This is particularly important for volatile growth stocks, which can reprice quickly and dramatically. Holding each stock to, say, 5% or less of your portfolio keeps you from being too reliant on any one position.

Learn more: How much should I have saved in my 401(k)?

Your allocation targets guide your initial portfolio construction and ongoing trading decisions. For example:

As a stock price appreciates, that position’s holding value becomes a larger percentage of your portfolio. The position could eventually exceed your single-stock exposure cap. That would be a cue to sell some of your shares to reduce your exposure and take profits.

A dip in price could leave you with room to increase your position. If you still believe the stock has an upside when that happens, it may be time to buy.

Michael Kodari, CEO of wealth manager KOSEC Securities, recommends setting target buy and sell prices to manage risk.

Target buy prices can be based on formal or informal estimates of the company's intrinsic value. Formal methods to establish value include dividend discount method (DDM) and discounted free cash flow (DCF) analysis.

Learn more: How to invest in gold in 4 steps

DDM quantifies a company’s value by estimating future dividends and adjusting that income to the present value. DCF follows a similar logic but discounts the company’s projected free cash flow rather than dividends. Informal methods for establishing value include peer and historical comparisons.

Note that many investors set their desired buy price lower than their value estimation. This provides a margin of safety from further stock price declines.

Setting target sell prices can be more straightforward. You can base these on unrealized gain percentages or whatever price would cause the stock to exceed your allocation targets. For example, you may want to take profits when the stock price rises 20% above your buy price.

Other data points that can inform your triggers include:

Relative strength index (RSI). RSI is an indicator of momentum that measures the speed and size of recent stock price changes. An RSI of 70 or higher indicates the stock could be overbought and ready for a price correction. An RSI of 30 or less implies the stock is oversold, which can create a bargain price point.

Valuation ratios. Price-to-sales and price-to-earnings ratios quantify how expensive the stock is relative to its revenue and earnings, respectively. These ratios are most meaningful when compared to peers and the company's historical values.

Analyst ratings and price targets. Analysts have in-depth knowledge of the companies they cover. They are not infallible, but analysts can quickly identify how recent developments affect a stock's outlook. If you're questioning the outlook of a stock, try reviewing what analysts have to say as a starting point.

Learn more: Read the latest stock market news

A solid investing strategy can transform your investing from guesswork to a productive methodology. Use it to ground your decision making — especially on headline-grabbing stocks like Nvidia or Tesla (TSLA) — for a surer path to wealth creation.

A high-yield cash savings rate might outpace inflation, but you won't get rich from your monthly interest earnings. If you are committed to a wealthier future, adding an investment program to your savings strategy is the way to do it.

Use this step-by-step guide to establish a sustainable, profitable, and long-term investing habit that helps you realize your financial goals.

Investing involves the risk of financial loss. It also consumes cash that may be better used for other purposes, such as paying bills or repaying debt. For these reasons, it's wise to get your finances in order before you put money into appreciable assets like stocks or real estate.

Two important issues to address are high-rate debt and cash savings.

Average credit card interest rates usually run higher than 20%. That is roughly double the long-term average annual return of the stock market. It is also several times greater than real estate's long-term average annual appreciation.

The takeaway? Credit card debt costs more than you can realistically expect to make investing. This is especially true in the short term when asset performance can stray from the averages. If you have high-rate debt, pay it off before you invest.

Learn more: The best 0% APR credit cards

Cash savings functions like an insurance policy for your investment portfolio. With enough cash on hand, you should not need to reach into your investment account to cover unexpected expenses. You can instead leave your capital invested to reach its full potential.

Many experts recommend accumulating enough cash to cover three to six months of your living expenses. With this balance, you can hopefully withstand a layoff, health scare, car accident, or other expensive emergency without selling your investments.

Over time, cash loses purchasing power due to inflation. You can minimize that effect by storing your emergency funds in a high-yield savings account.

Before investing in a taxable format, make sure you are taking full advantage of tax-advantaged retirement accounts. The tax perks you get in a 401(k) or IRA are valuable and expedite your wealth production.

Learn more: 401(k) vs. IRA: The differences and how to choose which is right for you

A 401(k) is typically available through an employer, though you can set up a Solo 401(k) if you are self-employed. There are two types of tax treatments for 401(k) contributions, called traditional and Roth. Your 401(k) may offer one or both contribution types.

Traditional 401(k) contributions are taken from your paycheck before income taxes are calculated. They reduce your taxable income. Taxes on the investment returns are deferred until you make withdrawals. Withdrawals are taxed as income.

Roth 401(k) contributions are made with after-tax funds. They do not reduce your taxable income. However, you pay no taxes on the annual investment returns, and qualified withdrawals in retirement are tax-free.

Learn more: What is a 401(k)? A guide to the rules and how it works.

Whether you opt for tax-deferred or tax-free investment growth, your account balance appreciates faster relative to taxable investing. In a taxable account, your real return is the gain minus the taxes you pay on those gains. Many investors must withdraw funds from the account to pay those taxes, which reduces the invested balance and gain potential. Investing within a tax-deferred account, on the other hand, postpones the tax liability so your full balance can remain invested, compounded, and growing over time.

Many 401(k)s additionally offer employer-matching contributions, which also accelerates wealth. Experts recommend taking full advantage of employer-matching contributions before any taxable investing.

Learn more: How a 401(k) match works and why you should seek it out

IRAs are widely available from financial institutions and some smaller employers. IRAs also allow for traditional and Roth contributions, but not in the same account. You would deposit traditional contributions to a traditional IRA and Roth contributions to a Roth IRA.

IRAs, relative to 401(k)s, usually have more diverse investment options. IRAs also have lower contribution limits unless you are contributing to a SEP IRA through a business you own. Additionally, Roth IRA contributions are subject to income thresholds. If you earn a high income, you may not be eligible.

You can invest outside of your retirement accounts independently or with the help of an advisor. If you decide to seek outside guidance, you can choose from a robo-advisor or a full-service financial advisor.

A robo-advisor is a managed investing program. Investments are selected for you based on a stated risk profile and strategy. You may have access to a human advisor, or you may not.

Robo-advisors generally cost less than human advisors, but the investment programs may be too generic to serve your needs.

Learn more: Robo-advisor: How to start investing right away

Full-service financial advisors can tailor an investing strategy to your situation. Many will also guide you on other financial strategies, such as budgeting, debt repayment, and insurance.

Investment managers normally have higher fees than robo-advisors. Some earn trading commissions, while others charge an annual fee based on how much money they manage for you.

Learn more: How much does a financial advisor cost?

If you decide to invest on your own, your next step is creating an investing strategy that aligns with your goals, timeline, and risk tolerance. Your strategy can take different forms, but many investors express their approach as a target asset allocation.

Asset allocation is the composition of your investments across asset types. Because each asset type responds differently to market conditions, the way you combine them shapes your portfolio's overall risk level and performance.

Five common asset types are described below.

Stocks are ownership positions in companies. The most accessible stocks are those that trade on public exchanges, such as the New York Stock Exchange or the Nasdaq. Stocks are available for purchase within many taxable brokerage accounts and some IRAs.

Stocks can gain or lose value from one year to the next, but they tend to appreciate over the long term. Some stocks additionally provide cash income by way of dividends.

Read more: Check out the latest stock market news

Bonds are debt securities. The bond issuer is the borrower, and investors, called bondholders, are the lenders. Bonds are most readily accessible to individual investors through mutual funds and exchange-traded funds (ETFs).

Bond values can rise and fall with interest rate changes, but the terms of the debt do not change. If a bond promises to pay a fixed rate of 2% monthly and then repay you $1,000 when the debt matures, those things will happen — unless the issuer defaults.

Bonds provide stability and income within an investment portfolio.

Precious metals include gold, silver, and platinum. You can invest in these metals physically by purchasing coins or bars. You can also invest in funds that hold precious metals on behalf of their shareholders.

Learn more: What to know before buying gold, silver, or platinum from Costco

Precious metals appreciate over long timeframes, but they can be reactive to economic conditions. Gold, for example, tends to rise in value when investors are feeling uncertain about the stock market. For this reason, gold is often held as protection against stock market downturns.

The downside is that gold can remain flat or negative when stocks are performing.

Read more: How to invest in gold in 4 steps

Cryptocurrency is decentralized digital currency. Decentralization means no bank or government agency oversees or regulates transactions. The most popular cryptocurrencies are bitcoin and ethereum.

Cryptocurrencies can be volatile and unpredictable. As an example, bitcoin lost more than two-thirds of its value between late 2021 and early 2023. It then set record highs multiple times in 2024.

Some investors hold cryptocurrencies to diversify their investment holdings. Others use these currencies to make private, low-cost money transfers around the world.

You can invest in real estate directly or indirectly. The direct method is to purchase real property to resell or rent. If you prefer to be less hands-on, you can buy securities that invest in real estate. These are more volatile than physical property because they can be traded quickly. Their market values, therefore, can be more reactive to financial market conditions.

Investors purchase real property for appreciation potential and rental income. The long-term average annual appreciation for real property underperforms the stock market, but home prices are less volatile than stocks.

Real estate securities are popular as diversification assets.

You can amplify your results by investing regularly, and a budget helps you do that. Choose an amount you can funnel into your investment account monthly without impacting your ability to pay bills. Assuming you are maxing out available retirement contributions, you can start small — say, $50 monthly. Plan on raising the amount as you build your investing skills and confidence.

You can stay on track by automating the funds transfer into your investment account. If possible, automate the trades as well. Doing so removes emotion from your trading decisions and establishes investing as a habit.

Even if your portfolio is simple, it will require some maintenance. Tasks to consider annually include evaluating results, validating your strategy, and rebalancing.

Check the performance of your holdings against their peers. For example, if you have an S&P 500 index fund, verify that it is performing on par with other S&P 500 funds.

Review your target allocations and the portfolio's overall performance. Consider whether you need adjustments to lessen volatility or improve growth potential.

Rebalancing is the process of restoring a targeted asset allocation.

Say you like the moderate growth profile of a portfolio with 60% large-cap stocks and 40% U.S. Treasury securities. Even though you make ongoing investments in this ratio, your portfolio likely reflects something different. This is because stock values can rise or fall, but bonds remain relatively stable. Usually, you will end up with a higher-than-intended stock percentage, which increases your risk. To rebalance your 60/40 allocation, you would sell some of your stock positions and use the proceeds to buy U.S. Treasurys.

You will not need to rebalance if you use a robo-advisor or a human advisor. Also, human advisors should periodically initiate conversations to evaluate results and validate the strategy.

Learn more: 5 questions to ask your financial advisor

If you are making regular retirement contributions, adding a modest taxable investment program is a wise addition to your wealth plan. Whether you opt for professional help or independent investing, learning about asset types and allocations will make your wealth journey more rewarding — and potentially, more profitable.

Your employer-sponsored 401(k) is a simple, automated, and tax-advantaged way to save for retirement. There is no question you should use a 401(k) if your employer provides one. What you may need help deciding, though, is how much you should contribute to enable a comfortable retirement.

Learn more: What is a 401(k)? A guide to the rules and how it works.

Your per-paycheck 401(k) deposit is typically defined in terms of a contribution rate. This is the amount of the deposit expressed as a percentage of your gross pay. Gross pay is the amount you earn before taxes and deductions.

The 401(k) contribution rate that is appropriate for you depends on various factors, including how old you are when you start contributing, whether your employer provides matching contributions, and how well your current salary covers expenses.

Your potential to build wealth in your 401(k) is directly linked to your timeline. The longer your timeline, the more time there is for your invested funds to grow.

"A person who can start saving in their 20’s could conceivably have a seven-figure net worth in their 40’s or 50’s. A person who waits to start doing this in their 40’s or 50’s will never be able to catch up to the level that someone who starts in their 20’s can achieve."

— Chris Orestis, president at The Retirement Genius

Say you begin saving to your 401(k) in your 20s. In that case, a 6% contribution rate is a great starting point, according to Lisa A. Hojnacki, participant services coordinator and team lead at wealth manager Greenleaf Trust. Hojnacki also recommends increasing that rate by 1% annually until you reach the maximum allowed contribution.

If you get a later start on retirement saving, say, in your 40s or 50s, Hojnacki recommends contributing at least 15%, up to the maximum allowed contribution when possible.

The maximum allowed 401(k) contribution is set by the IRS annually. In 2025, the limit is $23,500 or $31,000 if you are over 50.

Learn more: How much can you contribute to your 401(k) in 2025?

Many employers offer matching contributions, which are free 401(k) deposits paid for by your employer. They require you to contribute some amount, which the employer will “match” up to 100%.

As a common practice example, according to Fidelity, the employer might match 100% of your contributions up to 3%, plus 50% of your contributions on the next 2%.

Under these rules, you would contribute at least 5% of your salary to get the full employer match. If you make $60,000 annually, the math looks like this:

Your 5% contribution will be $3,000 annually.

Your employer match on the first 3% of your contribution is $1,800, or 3% of $60,000.

The remaining employer match is $600, which is 2%, or $1,200, divided by two.

In other words, if you contribute $3,000 annually, you get $2,400 in free contributions, paid for by your employer.

401(k) contributions lower your net pay, so they must be budgeted. This can be challenging if your income barely covers your expenses.

In this scenario, experts recommend contributing any dollar amount you can afford.

"Starting with anything is better than nothing," said Hallie Kraus, CFP, CRPC, and financial planner with The Humphreys Group.

If saving 15% of your income feels impossible, start with whatever you can manage — say, $25 or $50 monthly. Even small amounts, if invested, can compound and grow over time. The wealth momentum you generate can be a motivator to raise your contributions as your income increases.

Your budget may require you to start with a lower contribution rate and work up to 15% or 20% over time. The following strategies can help you implement those contribution increases.

Use auto-escalation. Some 401(k) plans have an auto-escalation feature that increases your contribution rate automatically. You set the terms, which include the amount of the increase and the cadence. It makes sense to plan the increase to happen around the time you expect an annual raise.

Hold lifestyle spending steady. You can use pay increases to raise your 401(k) contributions instead of expanding your lifestyle, according to Saïd Israilov, CFP, financial planner and wealth manager at Israilov Financial. Resisting the urge to upgrade your home or car after a big raise can help you secure a more comfortable retirement.

Trim spending. Vanessa Welch, vice president for financial insights at wealth manager Empower, recommends reviewing your spending to find places to cut back. "By reducing unnecessary expenses, you'll have more to invest and will make real progress over time," Welch said.

Remember, too, that your 401(k) contributions are deducted from your pay before income taxes are calculated. As a result, the reduction in your take-home pay after raising your contribution will be less than the increase.

You may also be interested in setting milestones for your 401(k) balance so you know your savings are on track. The process of setting milestones is an inexact science, however. One approach is to set a saving goal to reach by retirement and then work backward to identify milestones for ages 30, 40, 50, and so on. But knowing how much wealth you need to retire is hard to predict.

Learn more: How much should you have saved for retirement by 30, 40, or 50?

Pam Krueger, founder and CEO of wealth manager Wealthramp, recommends targeting a retirement balance equal to six to 10 times your gross salary. If that is the end goal, your 401(k) milestones might be:

401(k) target balance in your 20s. One to two times your gross salary. If you make $60,000, for example, the target would be $60,000 to $120,000.

401(k) target balance in your 40s. Three times your gross salary, or $180,000 if you earn $60,000 annually.

401(k) target balance in your 50s. Six times your gross salary, or $360,000 on a $60,000 salary.

401(k) target balance at retirement. Ten times your gross salary, or $600,000 on $60,000 in annual earnings.

This advice comes with two caveats. One, the target balances will increase if you expand your lifestyle as your salary grows. Expanding your lifestyle in your working years ultimately increases the cost of your retirement.

Two, these are guidelines only. There are many factors to consider when defining your target retirement balance.

As Thomas Buckingham, chief growth officer at Nassau Financial Group, explains, "There is no one dollar amount of assets or ratio to salary that will work for everyone."

A few factors to consider are your Social Security and pension benefits, living expenses, your discretionary spending habits, and whether you own a home.

When defining your 401(k) contribution rate, look to save as much as you can afford. Ideally, you save enough to capture your full employer-matching contributions and commit to increasing your contribution rate annually. As you get closer to retirement age, you can adjust your plan to suit your future lifestyle needs.