Does your retirement seem years and years away? While it may feel this way, you owe it to yourself to look ahead and begin giving thought to a time in your life that may account for 20 or more "golden" years and may in fact, be closer than you realize.
Today more than ever, planning for retirement is a necessity. Old Age Security, Canada and Quebec Pension Plans and employer-sponsored retirement plans are often insufficient to provide the income necessary for a comfortable retirement. Proper planning and follow through, however, can help you avoid shortfalls in your income needs and assure yourself of a smooth, secure transition from the world of work to the world of retirement.
Planning ahead means setting goals and deciding how they will be met. Retirement planning means not only getting ready for a lifestyle change, but also accepting a changing financial picture. In addition, you may want to consider how much or how little you want to leave to your children.
In the absence of a solid financial foundation, you may be faced with some hard choices over the course of your retirement years. A successful financial plan carried out faithfully will help soften many of them. Many retirees find themselves balancing between a satisfying lifestyle and one that lacks many of the comforts that make life easier, a situation that could be alleviated given the proper planning, savings, and investing done ahead of time.
Investing for a Future Lifestyle
Although pre-retirement and post-retirement investment portfolios should have both income and accumulation aspects, your pre-retirement portfolio should be more heavily weighted toward accumulation for later use. A post-retirement portfolio should show a greater allocation of investment resources toward income-producing vehicles, with a portion allocated for accumulation to generate future income.
Tailor-Make Your Investment Portfolio
You can use different investment management techniques as you create your own portfolio and consider the different investment alternatives available to you. A diversified portfolio is your insurance against the cyclical nature of financial markets. Diversification is used to create a margin of safety in the portfolio by spreading your investible assets among various groups such as mutual funds, annuities, life insurance and fixed return savings accounts (e.g., money market funds). The majority of all retirement assets today are contributed to tax-deferred retirement plans through employers or through Retirement Savings Plans (RSPs).
The fact that tax-deferred accumulation is allowed to fund retirement through certain investment vehicles, such as RSPs and employer-sponsored pension funds, provides an ideal stimulus for increasing the amounts going into them.
If you are financially independent at retirement, it will never be a period of boredom and disenchantment. Rather, it can become a time of new opportunities when you can try a second career, develop a new lifestyle or pursue new dreams and goals. You can start now to make your retirement years your most stimulating, fulfilling time ever--your true golden years.