Financial Zip

It is important to understand that in the world we live in that our employers offer no long term security to ensure we have a long and prosperous retirement. It’s more like thanks for all you have done, but we have to cut costs. There goes your retirement. These days’ retirement plans have to be thought out in advance. I would say if you can begin in your 20’s that would be a good place to start. If you are about to retire and you have little saved up then you need to look at other options to help increase cash flow so you can put enough away for your needs.




Priorities to Consider for Retirement.

Income. Income in retirement is the number one concern for most. After all don’t we all want to have a vacation home, or the time to visit exotic places? We need to build up a good nest egg. Due to the advancement in health care more people are living longer in retirement. In fact the time in retirement can be equal to the time spent in you working years which is generally between 25 and 30 years. So it is important to know how much income you want to receive during your retirement years.




Expenses. You want to consider the expenses you are going to have in retirement. Hopefully if you have planned well a lot of your debt is paid off. For those that are in their 50’s and 60’s the only debt you may want to carry into retirement is your home. But none at all is the preferred choice.




Inflation. Inflation is one of those things you cannot stop. It’s like rust, it will continue to eat into your savings and retirement funds if you are not getting good returns. The other important factor is that it affects your cost of living. Take a car for example; it may cost you $10,000 now but in 10 years it could double to $20,000. So everything costs more in future when inflation is factored in. The point here is when choosing a retirement plan you want to consider out pacing the inflation rate, which is historically 3-4%.




Investing. This probably is one of the more important areas to focus in when planning your retirement. This is where you will choose the types of retirement vehicles that will turn the your hard earned money into a nest egg for retirement. There are lots of ways to invest. Safe ways, risky ways. The question you have to ask yourself first is what is my Risk Horizon?

Risk Horizon is a way to gauge how risky you want to be with your money. As a general rule you can be more risky the younger you are. You have time on your side. If a big drop in the market happens you’ll have time to recover from it. The closer to retirement you get the more you want to be in conservative investments. There are people who are out there that can risk more because they have more. But most people don’t have that luxury. The best way to find out what your risk horizon or tolerance is, is to contact a financial adviser that can help you determine what that is.






Conservative to Risky Investments

These are examples of types of investments available out in the markets right now.

US Treasury Notes
Savings
Bonds
Mutual Funds
Common Stocks
Real Estate
Precious Metals
Options
Commodities

These are different places that you can invest in that may help your portfolio. As you can see in the chart above that as the risk increases the higher the returns are. Be sure to get proper advice and understanding before investing in any of these investments.




Different Retirement Vehicles

There are a number of retirement vehicles or qualified plans that can help you increase your retirement nest egg.
There are:
IRA’s
Roth IRA’s
401k’s
Annuities
Life Insurance

The real difference between these investment vehicles is how they are taxed. Each has a unique tax status, but all of them can invest in anything from stocks to real estate to commodities. Remember it is all about how these investment vehicles are taxed. So one thing to consider when choosing a plan is how do you want your money taxed?

So when starting a retirement plan it is important to consider some of the information above to determine how you want to save, when you want to save it, and where you want to save it. If you have specific questions or want to start on a retirement plan please contact a financial adviser in your area or companies like Fidelity Investments or Vanguard investments can help you if you have questions




Getting to the End

The most important thing these days in retirement planning is to start early. The earlier you start the more time you have on your side to allow that investment to grow. Compound interest is one of you greatest allies in building your retirement wealth. To start all you might need to do is open a mutual fund and contribute what you can to it. If its only $25 a month great or if its a $1000 a month even better. The point is to contribute something.