Friday, June 20, 2014

Plan Your Retirement

Retirement is one of the most important events in a person’s life. Enjoying a comfortable lifestyle once we reach our golden years is what most of us dream of. With this, early planning is the key in achieving your retirement goals, such as aspiring to retire in a house with a beachfront view or a farmland backdrop.

When it comes to retirement, the question of the amount of savings you have accumulated, or the income you need to maintain your standard of living. But there’s another subject that can be just as critical – the age of retirement. According to the latest Retirement Savings Assessment in the US, the average age at which people said they plan to retire was 64.5 years of age. More than one-third of those surveyed expect to work until 80 years old.

        Deciding when to retire depends on a complex mix of lifestyle preferences, changes in circumstances (such as annulment or widowhood), health considerations and financial readiness. To help pick your date, make the most of benefits to which you’re entitled and run the numbers to see whether your expenses will match up with your income. Research shows that the act of calculating what you need for retirement improves your chances of achieving retirement.

        If you plan to retire at age 60 and hoping to live 20 more years after retirement, you should start saving and building your fund at 40 years old. Take note though that the idea is to save as much as you can for your retirement fund, so starting earlier than 40 years old obviously has its advantage.
You also need to consider that the average life expectancy is getting longer as we all take vitamins, exercise, eat better, and learn how to control the diseases of aging like diabetes, blood pressure, and heart disease. The average man who is in good health today at age 50 can expect to still be here at 82. The average woman lives longer than man.

Preserving wealth is about your own retirement. You can’t wait until you’re 50 or even 40 to think about this period of life. This is one of the most important period of your life, but if you don’t take it seriously and include it in your long-term plans, reaching 70 could be financially painful and unpleasant.

        Here are the steps that you will put on tract to retire when you want:

  1. Set saving goals. Try to consistently save 10% to 15% of your salary in your retirement account. Starting early and saving regularly not only gives you the boost of compounding. GSIS and SSS retirement are some means to save, but you can’t rely on it since retirement benefits may be less with your desired spending amount upon retirement. Most retirement planners recommend that you save enough to replace about 70% to 80% of your preretirement household income to cover expenses to support your standard of living. Just keep in mind the effects of inflation in the purchasing power of your money in the future.

  1. Keep a balanced portfolio. Your retirement fund should include a diversified mix of stocks and a fixed-income component of bonds and cash. Stocks provide the growth to bolster your saving and combat inflation; the fixed-income investments protect against market losses. If you’re in your twenties, you can afford to allocate 80% of your portfolio to stocks. As you get closer to retirement, you’ll want to pare that side of your portfolio to 40% to 60%, depending on your risk tolerance, leaving the rest in bonds and cash. At least once a year, review and rebalance your portfolio so you have a proper proportion of cash, stocks and bonds.

Here is a story of how an old-age person changes his/her new retirement lifestyles. Imagine you are the one here:

“At 71, Juan has buried his wife, Juana, and decided that that their two-story, three-bedroom house was finally too much for him to maintain on his own. Juan was a rich man. Although Juan still enjoys a round of golf once a week and attends health club to go swimming a couple of times a week, the isolation of living alone has led to depression. With his diabetes and arthritis, he has found it hard and expensive to continue to live alone. His two sons, now married with children, no longer live in the same city and are not able to provide a comfortable living space for him. Nor does Juan want to be a burden to them. He has decided to sell his home and live in a smaller house.”

The story tells us how hard to live alone in our twilight years. Life of Juan is simply boring. With his predicament, he can hardly enjoy even with no financial burden. In 2005 National Bureau of Economic Research study called “Health and Retirement Study,” results showed that complete retirement leads to a 5-16% increase in illness conditions and 6-9% decline in mental health, over an average post-retirement period of six years.

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