Screened IRAs and 401Ks.

Saving Up for a Green Retirement

Putting money aside for retirement is an important part of planning for your future. Like most people, you probably want to make sure there's enough to live comfortably after you've stopped working. By choosing an IRA or 401K from the growing field of socially responsible investments, you can not only provide for the money, but also the healthy planet you'll need to enjoy your retirement.

Although the myth persists that socially screened investments lag behind in earnings, statistics tell the real story. Of the 47 socially responsible funds tracked by the Social Investment Forum (SIF) over the last three years, 70 percent earned top Morningstar ratings. And several socially responsible funds with stringent environmental screens have outperformed the S & P 500 over the last five or 10 years.

Jack Brill, co-author of Investing With Your Values, explains the magic of socially responsible investing. "By screening out the polluters, tobacco companies, companies that wait for recalls, you're avoiding disasters in the stock market," he says. "Just look at what happened to Exxon stocks after their big oil spill, or recently, what happened to Firestone after its tires were recalled. The stocks took a dive." Brill argues that social and environmental irresponsibility eventually costs a company financially, and by avoiding those companies you eliminate risks from your portfolio, increasing the likelihood that your retirement dollars will multiply.

For investors looking to start a socially responsible retirement account or transfer existing funds into one, there are now more options than ever in the rapidly growing field. According to the Social Investment Forum, most socially responsible mutual fund companies offer IRAs of all types, and today there are about 175 such mutual funds to choose from.

Taking Stock of Your Options

"Any investor looking to do retirement investing must diversify and think long-term," says Brill, who advocates building a retirement portfolio from broad-based funds that utilize many different industries, rather than "sector funds" that only invest in one part of the economy. "Young investors can take more chances and put more of their money in stock funds," he says, "but as you approach retirement age, you need to get more conservative. At that point, bond funds might be a better choice."

Brill suggests investors consider funds with wide social screens, even if environmental causes are the only ones they are passionate about. "Broadly screened funds like Domini and Citizens have screens that will eliminate the polluters, and these funds both perform very well."

The numbers verify this point: Since inception, both companies have offered funds that performed better than the S & P 500. Both companies also avoid investing in nuclear power or corporations that regularly violate environmental regulations, actively shape corporate policy on the environment through shareholder resolutions, and offer IRA choices through their funds to suit both younger and older investors.

For people who prefer to take a slightly more environmentally proactive stance with their IRA, Green Century offers a fund that focuses exclusively on environmental issues. In addition to avoiding companies that waste resources and violate environmental laws, the Green Century Balanced Fund (GCBF) seeks to invest in companies that offer products and services designed to solve environmental problems while minimizing their own impact. Since the GCBF seeks environmental leaders in all sectors of the economy, it is likely to be safe for the long haul. A return of 93.5 percent last year shows its potential for high performance.

Environmentally screened IRAs aren't the only way to put your retirement dollars to work for ecological values. Todd Larsen of SIF says that more and more employers are offering their employees socially responsible retirement accounts. According to Larsen, 35 percent of socially responsible investors report that their employer offers a socially screened 401K. And 70 percent of people offered that option took it. Larsen adds that if an employer does not offer a socially screened retirement fund, a small group of employees can usually convince the company to provide the option.

Now you can even get an eco-friendly retirement account through a mainstream financial planner. Talking to Charles Schwab or Smith Barney about such an account might introduce you to Light Green Advisors (LGA), a Seattle-based advisor offering investments based on corporate environmental leaders in all sectors of the market. LGA can provide both IRAs and 401 Ks, and it stands out as yet another environmentally focused investment institution that has beaten the S & P 500.

To learn more about socially responsible retirement planning, check out the new edition of Investing With Your Values (New Society), or CONTACT: Social Investment Forum, [phone], www.socialinvest.org.

DAMON FRANZ is a Washington, DC-based freelance writer who invests most of his money in beer and bike parts.