Save for retirement
It is absolutely mandatory that every person establish a plan for retirement. No one knows how long his life might be, and more importantly, it is inappropriate and risky to depend on others to take care of you. Of course, it might happen. Your children might pay for all your needs, and you might even win the lottery. All those events can contribute to your security in old age, but you should have a firm plan in place to pay for the basics.
Take control of your financial future
Picturing yourself as a retiree may be hard if not impossible. But if you could envision those future years, you would probably see a life full of activity and decades of health, happiness, and prosperity.
The reality, however, is that the pleasure and comfort of your later years depend, to an ever-increasing degree, on the action you take today.
So many changing facets of our workplace have made it more important than ever to take control of your financial future. By investing now with a long-term focus, you can greatly improve your chances of having a fulfilling retirement.
By most estimates, you will generally need at least 70 percent of your final working years’ income each year to maintain your lifestyle after retiring.
Beware of inflation
As you begin thinking about how much you will need for a comfortable retirement, you may be startled to learn the impact of inflation. According to Standard & Poor’s, at an average annual inflation rate of 3 percent, your cost of living would double every 24 years. Your annual income will need to increase each year, even during retirement, in order to keep up with the gradual rise in prices of everyday goods.
Invest early and often
By starting early and investing systematically you could potentially benefit from the potential of compounding and tax deferral.
Another advantage of today’s retirement planning options is that you have some control over how your money is invested. Investment plans need to offer a variety of options because different people have different degrees of risk they will accept, as well as varying time frames they intend to hold their investments. A portfolio can be diversified to take these factors into account. It is a wise idea to consult a financial professional for complete information.
Find ways to grow your retirement income
Ask any retiree what they fear the most and chances are most will say ‘running out of money’. But there are ways to stretch your retirement income and things you can do to make your money last as long as possible.
Managing your finances can be hard work even if you have some financial knowledge. Ask for financial advice if you need help with investment strategies. Ask your adviser to explain different investment strategies, the level of risk involved and the potential returns you can expect.
Ensure you have a realistic plan
“To develop a sustainable strategy that meets your specific needs, some important considerations would be your age at retirement, life expectancy, living expenses and the rate of return you expect from your investments,” says Dean Urbanski, Vice President, BMO Harris Financial Advisors, Inc.
A realistic retirement should therefore include these steps: reduce living expenses, develop a withdrawal strategy, carefully allocate your assets, choose a post-retirement career and Improve your health.
If you have retirement savings, you must come up with a withdrawal strategy.
Withdraw too much and you are likely to outlive your assets; take too little and you may unnecessarily sacrifice your standard of living.
As pointed out earlier, the first thing to do is to sort out your finances. Work out how much money you have now, how much you might have in the future and where it would be coming from.
It will be helpful to stress that the rising cost of living means you need to plan on an annual retirement income that could be substantially higher than what you spend now and that you may have higher expenses in some areas such as medical care, but lower expenses in others.
Again, you will generally need at least 70 per cent of your final working years’ salary in each year of retirement.
Source : Independent