How Not To Outlive Your Money

There will come a point in one’s life that one will decide to call it quits. Professionals who have been working for over 30 plus years may have the inclination to wave the flag and proudly call it a career that was well-worked.

Instead of the normal office politics, you will now have to deal with travel, added family time as well as new opportunities which were previously unavailable. However, there is a particular feeling that will always grip the retiree whenever he or she contemplates about life without work–that is the fact that your finances will not be as regular as they were when you held an enviable and high position in the corporation that you worked for in the last 30 or 40 years. One begins to think and wonder if you will be able to manage through the coming years with only your savings and a few investments to keep you afloat. There will be things to consider such as inflation, political disturbances or economic crashes. Amidst all of this, you need to have solid action steps in order to ensure your financial security in the coming years after retirement.

Today, there are various methods for you to be able to build income retirement strategies which will essentially secure your retirement principal in a world that involves a lot of uncertainty as well as disastrous events. These will give your assets the ability to stay ahead of inflation and can also provide you the opportunity to actually amass even more wealth while having less financial risks. Thus, your twilight years will be less of a burden and will eventually give you the peace that you so desperately desire.

 One of the most important things that you need to do is to perform a retirement analysis in order to determine what the most important retirement planning factors that will impact your future income. Some of these are the sources of income, retirement expenses which will be factored for inflation, as well as retirement assets. These need to be calculated in order to come up with a target rate of return which is necessary to be earned on your assets. This is to provide a retirement income for you and potentially your spouse’s lifetimes.

One of the ways to do this is to do a Monte Carlo simulation in order to find out the probability of success which will utilize various historical expectations for portfolio volatility which is based on return over the estimated retirement duration, i.e. 35 years. The analysis will give you a picture of various significant assumptions that might eventually affect your retirement finances such as health related expenses as well as the consequences of selling or not selling personal assets such as real estate, collectibles or maybe a business. This will essentially give enough leeway for "what ifs" in order to determine the best possible retirement strategy which give you enough confidence for you to be able to retire as early as possible.


Posted by Ardent Editor on May 3 2007 in Financial Planning

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