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How to Plan For Retirement



HowtoPlanForRetirement


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How to Plan for Retirement


Retirement planning can begin at any age. The earlier you begin, the less difficult it will be to reach your financial goals. Many people not only want to retire without financial worries about daily expenses, they also want to have sufficient funds for travel they may have postponed while building a career and minding a family.

Some hope to move to a warmer climate or a smaller home that requires less maintenance.

Adequate funding for your retirement goal is the foundation of your retirement plan. Devising a strategy for reaching those goals is a long-term process.

HowtoPlanForRetirement2

Step 1: Set Retirement Goals

• Retirement goals differ from person to person. Depending on your employer, your career or your needs, you may be able to retire as early as age 62 or you may need to wait a few more years. The retirement funds that you will be able to access will usually increase as you age. This is true of Social Security and many pension plans. Individual Retirement Accounts and 401K plans also offer greater benefits after age 65.

Step 2: Review Assets

• Figure out what assets you currently own that will be available to you after retirement. These assets may include: your current home, regular savings, vacation homes, vehicles and current investments. Of course, you should include Social Security or company pension plans if these apply.

1. Visit My Money to calculate your Social Security payments by age and in case of disability.

2. If you are ten years or less away from your target date, download "Taking the Mystery Out Of Retirement Planning," a free retirement planning guide with worksheets for planning how to reach your goals.

3. List all personal assets (liquid and non-liquid) by maturity date.

4. Consider using your home's equity for additional income. Estimate potential income from reverse mortgage payments.

5. List all sources of income, including possible income from post retirement jobs or a small business.

• Step 3: Calculate Risk Tolerance

• According to Investopedia, risk tolerance is the amount of loss you are able to endure in the short term in exchange for a higher potential return in the long run. Investopedia: Risk Tolerance-- This means the older you are, the lower your risk tolerance. For instance, your risk tolerance should be greater if you begin your career and your retirement plan at age 25. If your retirement date is within ten years, you will have much less time for corrections or recovery from poor investments. However, you will need to balance risk and potential in order to achieve any income growth.

• Step 4: Develop Savings Strategy

• Few people are able to retire on their pension plans or Social Security alone. Strategic saving and investing make the difference between a financially secure retirement and collecting cans for income. Most people know they are not saving enough, but many simply do not know how to get started. The rule of thumb that all experts agree on: pay yourself first.

• Find money for savings and investment in your budget. Aim for at least 10 percent of your current income. Increase the amount as you become comfortable with the loss of spending capital. Look for ways to save on everyday expenses and large purchases, including insurance, home mortgages, and entertainment. Use this found money to kick start your retirement plan.

Step 5: Select Investments

• The result of a "one size fits all" investment plan may not get you to your goal on time. Customize your investment portfolio to reflect your starting age, your risk tolerance and the amount of money you really need.

1. Calculate the rate of return required to realize your goal.

2. Many factors can impact your retirement benefits and income. Seek competent advice about the effects of:

    1. Early or delayed retirement.

    2. Required minimum withdrawals from retirement accounts.

3. Get retirement investment information your from your banker or a financial advisor.

4. Investigate brokerages before selecting one to handle your investments.

5. Learn the advantages and disadvantages of self-sponsored and employer sponsored contribution plans.

6. Arm yourself with facts.

7. Bonds

    1. Stay safe with bonds if you don't like risk.
    2. Expect a return rate slightly higher than traditional savings accounts. However, inflation may reduce your yield even more.

8. IRAs

    1. Consider I<RAs for the tax advantages. Currently, an individual can put $4,000.00 annually into an IRA.

    2. Traditional and Roth IRAs will yield substantial returns over the long term.

    3. Catch up provisions allow people age 50 and older to make additional tax-deferred contributions.

9. Stocks

    1. Buy stocks for maximum growth.

    2. If you are 20 or more years away from retirement, invest up to 70 percent. Reduce your allocation to 60 percent or less by age 60. By age 65, aim for no more than 20 percent. 3. Minimize potential losses with Blue Chip and S&P 500 stocks.

10. Diversify your portfolio.

11. Rebalance your portfolio allocations as you age.

12. -Replace stocks with CDs, Bonds, Money Market and Mutual Funds.

13. Be proactive about managing your investments. You will worry less and sleep more soundly by taking charge of your retirement plan.

• Conclusion

Start saving for your retirement today and eliminate the worry about having enough money for the future. Prudent investments and regular reviews of your retirement planning strategy could result in enjoyable trips, educational pursuits and more quality time in your golden years. With a good plan, you might be able to retire even earlier than you think.



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