Planning for retirement is important but often completely ignored. It always one of those tasks to do tomorrow!
Ideally you should have at started thinking about your retirement planning in your twenties ... but as they say "rather late than never"!
What will you do now? Where do you start?
Here's one idea if you have a mortgage loan. You should consider whether you should pay it off before you begin saving for retirement. Or whether you should use the low cost mortgage finance for other investments that have higher returns.
If you pay off the mortgage, then you'll be debt free. Freed of the stress of paying a monthly mortgage payment. You'll pay no rent to pay and there will no longer be a drag on your cash flow after you retire.
If you invest that money in your retirement fund, then you can benefit from the deferred tax return of these investments. Your mortage is paid with after tax money and your retirement benefit with deferred tax funds.
The decision depends on your own personal situation. What will suit you best? Another option to consider is to opt for loan modification if you need the cash and want to reduce the current payments.
For most people in most countries there are many rules and regulations. They are complicated and can be difficult to fully understand.
So a good place to start will be a fee based financial advisor to take you through this maze.
Planning for Retirement - The 5 Tips
1. Plan for Health Care Costs
Around the world health care is very expensive (especially so in the US) and as you age physical problems start getting worse. If you are only planning in terms of your current health, then you could be making a big mistake.
That is because after you retire the years of neglect and misuse start to take effect. The chances are that you will need more medical care. In addition don't overlook the chance of unexpected health issues.
Thus, you should plan for your health after retirement and carefully consider the medical expenses that you might need.
2. Consider the 2 Stages of Planning for Retirement
The two main stages of retirement are one the period before and two the period after the official retirement. .
Your first concern should be to safeguard the period after official retirement with various types of investments. These will include investments such as 401(k' s, pensions, annuities, individual retirement accounts, property investments and savings.
However, in case you want to take an early retirement, then you also have to consider funding the period before your official retirement age.
In this case you should try to find out what assets you have that generate income. You should try to invest a lot more and also invest in places where the returns will meet your requirements This may mean taking on more risk to get the planned returns.
3. Review Your Assets
Find out exactly what assets you own that will be available for use to you after retirement.
In this calculation you may include your home, your vehicles and vacation homes, and your savings and your current investments. When looking as these understand the difference in liquidity. In many cases you may have to consider converting your bricks to bread!
Also calculate the income from from social security and company pensions.
4. Assess Your Investment Risk Tolerance
Carefully consider the amount of risk you are able to tolerate. The amount of risk that you can tolerate in exchange for a higher possible return is your risk tolerance.
Generally the the older you get the lower your risk tolerance as you do not have the benefit of time to recover from losses. Thus, you risk tolerance can be higher if you begin your retirement planning really early. So ideally you should begin planning for your retirement as early as possible.
5. Develop a Savings Strategy
You should realize that you may not be able to retire on your social security and your pension alone. Planning for retirement should include extra savings for unexpected events. So build this into your retirement savings strategy.
You should aim to save at least 10% of your current income; you should also try to save on every day expenses so that you can put in more towards your retirement nest egg.
A great option is to set up a small side line business that will provide a predictable boost to your retirement income.
So these are a few issues that you should be considering in your planning for retirement.
Retirement Planner: Start yours today, it's the first step to a successful retirement.
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