As you may already know, it is never too early to start planning for your retirement. However, choosing the right plan can be difficult and tedious. This blog provides a brief blueprint of the most important areas in retirement that require your immediate attention. By analyzing each point listed, you will undoubtedly increase your chances of achieving a long, fulfilled, and happy retirement.
These are the three major components of interest that you must understand when saving for retirement.
- Return to Risk
The risk to return principle states that risk and return are linearly related. This means that if you take on riskier ventures you will generally be rewarded with higher returns, but also are subject to more risk of failure. When planning for retirement, it is not likely that you want a whole lot of risk. Rather, you must firmly ensure your retirement plan is intact for when you need it.
One of the most important things you need to do is decide where to put your money in order for it to grow at the highest rate with the least susceptibility to impairment. For example, Barclays, CIT Bank, and Synchrony each provide slightly above 8% return rates. It depends on which bank you’re are most familiar with and how you want to receive payments in the future, but generally each plan functions in the same way.
Inflation has proven to be a major factor in the purchasing power of the dollar historically. As a general rule of inflation, as prices go up the purchase value of money goes down. Over the past 50 years, inflation has averaged 4.07% per year. If you did not invest money fifty years ago, the purchasing power of that dollar amount today is extraordinarily lower than if it was even invested equal to the inflation rate. This is the main reason people, even if extremely conservative, choose to invest their money.
- Manage Spending
Lastly, it is important to manage your spending. Some choose to plot out how much money they can spend each month, week, or even day. Others opt to spend cash on daily purchases, forcing them to take note of exactly how much money that have in the accounts. Saving money is the crux of retirement, so it is imperative to ascertain a certain degree of stringent savings schemes in order to best prepare for retirement.
Plan now. Enjoy later!
If you do not have a financial background or do not feel comfortable estimating these plans further yourself, it may be in your best interest to seek advising for a certified financial planner. Local Boston Financial Planners may be contacted here. Moreover, for a more in depth guide on preparing for retirement, check out The Essential Guide to Retirement.