Whatever your age, it’s never too soon to look ahead and begin giving thought to your retirement. With proper planning, you can make the transition to retirement a smooth, comfortable and secure ride.
Today, more than ever, planning for retirement is a necessity. Social Security and company retirement plans are often insufficient to provide the necessary income for a comfortable retirement. You must plan ahead by 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.
You may be faced with some difficult choices. A successful financial strategy can mean placing your spouse of some fifty years in a nursing home with a pleasant, home-like atmosphere and superior private care vs. being forced to choose a "no-frills" nursing home. Or, it could mean the difference between dining out more frequently vs. preparing more meals at home. Many retirees find themselves balancing between having a sufficient lifestyle and lacking some of the comforts that make life easier. This “give and take” could be alleviated if the proper planning, savings and investing are done ahead of time.
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 smaller portion allocated for accumulation to generate future income.
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 help reduce volatility in the portfolio by spreading your investible assets among various products such as mutual funds, annuities, life insurance and fixed principal vehicles (e.g., money market funds). The majority of all retirement assets today are contributed to tax-deferred retirement plans through employers or through individual retirement accounts (IRAs).
The fact that Uncle Sam allows tax-deferred accumulation to fund retirement through certain investment vehicles, such as IRAs 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--truly your golden years.