The mention of the word retirement sends a chilling wave in the minds of many people. Will I be able to sustain myself? Will I outlive my money? When should I retire? Am I too young to think of retirement? These are just some of the questions that linger in the minds of people. In fact, many employees nowadays view retirement as a daunting matter and thus, they do not even think about it.
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However, retirement is unambiguous. With proper planning, you can secure your future with no worries. Before highlighting the ways in which a person can effectively plan for retirement, we’ll debunk some of the misconceptions that are being perpetuated regarding retirement.
Misconceptions About Retirement
I’m Too Young To Think Of Retirement
Well, if you ascribe to this notion, then no doubt you have not understood the tenets of compound interest. For example, If you invest 25000 Euros at the age 25 at a rate of return of 12% annually, by the age of 65 you would have a whooping 2million Euros, from your principal amount. Compound interest is an advantageous ideal to consider if you are looking for a long term investment. Thus, you are not too young to benefit from the time-based value that compound interest brings.
I’m Already Old. I Can’t Save For Retirement
Well, it’s better late than never. We should not disregard the fact that time adds value. If you compare when you would start planning for retirement in old age and when you are young, it’s true that you would have been better off if you had started saving for retirement when you were young. The key premise being on time. Anything that is subjected to time will inevitably add value. The difference lies in the specific type of value. However, this is not a condemnation of those who did not plan for retirement early. If you have not started yet, you need not worry. Start saving and planning now for your retirement.
However, this is not a condemnation of those who did not plan for retirement early. If you have not started yet, you need not worry. Start saving and planning now for your retirement.
The above represent some of the misconceptions about retirement that many people ascribe to. We have seen that they are totally fallacious and are far from being true.
We can now go to the subject matter of planning for retirement. There are a multitude of ways in which you can plan for your retirement. Here are some of the ways you can plan.
Planning For Retirement
What If The Odds Are Not On My Side?
The fear of the unexpected is real with people who are contemplating retirement. Human nature is inclined in such a way that one will always be anxious and fear the unexpected. The fact that we cannot predict the future accurately aggravates the situation. For a fact, you can never plan adequately for an unexpected event. But this shouldn’t be a reason for despair and hopelessness.
Undoubtedly, you can prepare for the unexpected through prudent financial planning. Think of the worst case scenarios and put up a course of action in the event that the ordeal happens. Have a backup plan and a contingency plan to counter the situation. Prepare the necessary paperwork for your accounts, trusts and investments in readiness for that unexpected event. Know the vital contacts to keep and the vital people to consult. Self-Insurance is also a sound and vital practice.
If you purchase a bond, it implies that someone is indebted to you and will pay you interest on top of the principal amount. The safest bonds out there are government bonds. You can consider these as a means of saving for your retirement as income is guaranteed. With bonds, you can never go wrong. In fact, they are also considered one of the investments with the lowest risk.
Investing In The Stock Market
Stocks represent the units of ownership in a company. Each shareholder is entitled to a portion of the company’s earnings for as long as they have a shareholding. The prudent action to take is to carefully consider which company to invest in. You should look to invest in companies that are stable and have a track record. This will guarantee earnings in the form of dividends. This can form your retirement savings strategy.
Income From Property
You can consider investing in real estate as a way to secure your retirement. Rental income can provide a stable source of income. More so, real estate property tends to appreciate in value. Thus, it is worth considering it as a way to earn during your retirement.
Vanguard Index Funds
Investing in popular index funds such as the Vanguard is a prudent move. Index funds have more reliability, have considerably low fees and are a better choice in relation to mutual funds. Mutual funds tend to pool money from various sources but the normal trend is that they invest in a limited number of stocks. Index funds, however, you get to invest in an entire index of a specific financial market, say the S&P 500.
Try to establish how much expenditure you expect in your retirement. This will involve identifying all materials you are likely to expand on. After doing this, critically analyze your monthly income and try to match it with that expenditure plan. This will help you establish whether you need to save more so as to add on to your retirement income. It will also enable you to know if you need to cut on spending now so as to enhance spending in your retirement.
It is normally said that failing to plan is planning to fail. With life uncertainties, you can never be too sure of anything. Moreover, risks are ever present in life. Thus, insurance is vital, especially now that you are planning for retirement. You may experience unexpected heath challenges, emergencies and also complications. It is cumbersome to cover such costs associated with unexpected health problems, especially on a fixed income. Thus, make a point of getting a health insurance cover in the event that the inevitable happens.
Take Advantage Of Government Benefits
You can benefit a great deal when you utilize some of the provisions that the government has placed with regard to retirement. This includes Social Security Benefits.
Social Security has been considered as one of the longest retirement assets you can hold on. Thus, go ahead and draw your benefits and most importantly utilize it properly. The timing of your drawing is also crucial.
Well, if you really have major health issues in your old age, it’s better you draw it earlier. Again, if you have major reason whatsoever that you won’t live that long, say 90 years and beyond, the best advice for you is to draw it early. It’s about seizing the opportunity when you have it and benefiting from Social Security while you’re still there.
Part Time Employment
What if you worked part time instead of staying inactive and idle once you have retired? Part-time employment is indeed a viable way of earning that extra income after retirement. You could work half day or for specific hours. But you have to consider whether it is convenient for you especially if you are in your sunset years. You do not want to strain yourself again after a whole life of full employment.
There are many avenues in which you can work part time. You could be a consultant in your area of expertise. You can also consider being a part-time lecturer at a local university or college and impart knowledge to young minds and students in your area of expertise. It is actually a nice experience because it would be like narrating what you have been doing your whole life. Who knows, you can actually end up inspiring a student.