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Taking Steps Toward Retirement Planning

Everyone has to think about retirement at some point in their lives and it is better to consider it earlier in life rather than wait until you are older. Many people wait until they are older without a plan in place. Yes, creating a retirement plan will take some serious consideration and hard work, but you must do it.

Assessing Your Money

To create a retirement planning, you have to assess the amount of money needed to be saved. You also should know the amount needed each year for living expenses after you retire. With both factors, you will find it challenging, but helpful to financially plan for the future. However, you have to keep track of your investments such as your 401K and other retirement savings. If you have to adjust your standard of living, by all means do so.

Start with a 401K Savings

You could plan for retirement on your own or you could hire a professional financial advisor for help, especially if you are late in making this very important step. Do what you can on your own such as starting to put money aside for your retirement. A financial advisor can only recommend this, but not force you to do so. It is in your best interest to do so on your own. You can give your employer permission to take money from your wages toward an employer-sponsored retirement plan such as a 403b plan or 401K savings plan. This is the first start of something good.

Investment Options

You could also invest in an IRA (individual retirement account). You will probably be entitled to social security and pension, which is a given for most people who devote their working life to one or more employers. You also have the option to invest in a rental home, stocks, bonds and possibly a business. If you have selected one or more of these options, then work out the accrued amount so you can get an idea of the amount that you will have by your retirement. Is it enough to allow you to live a similar lifestyle or do you have to adjust your lifestyle?

Effect of Inflation

One thing that most people seem to forget when planning for retirement is the impact of inflation on their savings. Cost of living will never stay the same ten or twenty years from now. In most cases, cost of living will increase and not decrease as the years go by. So, you have to factor this in when creating a retirement plan.



Consider how much money will be needed at retirement. Does the money you are making now meet your standard of living? Will this amount be sufficient for retirement, if your goal is to travel and take care of your personal needs? Forecast an annual amount that allows for comfortable living at least 25 years after you retire. Multiply the annual amount by 25 and that is the income needed to maintain your retirement lifestyle. With the amount that you came up with, you now have a definitive goal as to how much you will save toward retirement.


Signs You’re Not Ready for Retirement

Retirement is, to most people, something that seems very far in the future. As such, people will often put it out of their minds until much later in life and then scramble to try and get retirement-ready.

Unfortunately, though, retiring comfortably takes planning from an early age, ideally the age when you first start working full-time at your chosen career. If you’re getting close to retirement age and haven’t done the proper planning, there’s a good chance you won’t be ready. And, fortunately, you can do some backpedaling to make up for your lack of planning…but only if you realize you’re not ready for retirement quite yet.

Below, we’ll detail some classic warning signs that you’re not ready for retirement, and if you find that they apply to you, you’ll know that you need to step up your planning and saving to get ready.

Sign #1: You Don’t Have a Plan in Place

A lot of people think they’re doing well if they just sock away a little bit of money each month toward their retirement. In truth, though, really being ready for retirement entails having a detailed financial plan. When you’re truly ready to retire, you’ll have a clear estimate of what your post-retirement expenses will be and a plan in place to ensure you have enough coming in each month to meet those expenses and then some. If you don’t have that kind of plan, it’s time to start making one! You can do your calculations yourself, or, even better yet, work with a financial planner to really get something solid and reliable set into place.

Sign #2: You Still Have Dependents

People tend to think that when a person should retire is based simply on that person’s age. In reality, just because you reach a certain age doesn’t necessarily mean you’re ready for retirement. If, for example, you’re still caring for dependents, such as young children or elderly parents or loved ones, you’re probably not ready to retire, no matter what your age. Dependents are typically a big expense and often require people to work longer than expected or, at the very least, to make additional plans and/or sacrifices to accommodate those dependents. Thus, if you have dependents in your life, you’ll need to decide now how you will take care of them after retirement.

Sign #3: You’re Still Struggling

When you retire, you should be at a good place, financially speaking. If you’re still not able to meet the demands of your monthly bills each month, then, you’re definitely not ready to retire. Most people live on less in retirement than they did when they were working, and if you can’t live on your income now, living on your retirement income is going to be a real stretch, if not an impossibility.

As you can see, retirement isn’t just something that happens. It’s something that you have to plan for. Thus, don’t do it until you’re truly ready, and if you’re nearing the standard retirement age, start planning appropriately now. Even if you’re not, planning early will only help you in the long run.


How much money should you keep in stocks when retired?

If you are in the process of retiring or considering it, you may be wondering how much money to keep in your stock investment at time of retirement. Many retirees are thinking about this issue since the allocation and diversity of assets is a primary component of any retirement plan. But how do you know what mix of stocks and what mix of bonds will work? Where is the balance to secure your nest egg? There are three main ways that this is dealt with by investors, arriving at a practical combination of stocks and bonds to secure your retirement funds.


First Technique

The first technique used by financial investors is to employ the static asset distribution approach. How does this work? You decide on a combination of stocks and bonds that offer a rational exchange as it relates to both the risk and the return. This would fall in a sensible range of 60 percent in bonds and 40 percent in stocks or the reverse, which would be 40 percent in bonds and 60 percent in stocks. After this, the retiree would maintain the combination throughout the period of retirement; only occasionally selling a few stocks here and there, but trying to balance the proceeds. Having a balanced retirement fund with 60 percent of the assets in stocks and 40 percent in bonds is the model pattern of static asset distribution.


Second Technique

The second technique known to and used by financial investors is the glide path. What is this? It involves the start of acquiring half of our nest egg primarily in stocks and then steadily shifting to bonds when you get to your early 70s with an anticipation of hitting a combination later of 70 percent bonds and 30 percent in stocks. At this time, you wouldn’t move around the combination until you get to retirement.


Target Date Approach

Most financial investors take this target date approach so that less risk can be assumed as retirees get older. However, it is important to note that not all of these kinds of funds result in a similar percentage in stocks or in bonds. It all depends on how conservative you are up until your retirement.


Third Technique

The third method is a spin off to the glide path and it is called rising equity. This takes the opposite approach, which is more risky. Rather than reduce your exposure to stock purchase, you would increase the exposure, possibly beginning with 30 percent in stocks and a steady boost until you get to 60 percent in bonds. So you would start out with a conservative amount and then increase as you get closer to retirement. Doing it this way will secure your savings and reduce any risk of having to access your retirement savings account.



While these techniques all have their own merits, it is important to note that you should keep your stock exposure to no more than 30 percent, even as you grow older so that you don’t live longer than your savings.