Planning Your Financial Future

You need to begin planning your financial future now. The more time you have to do this, the easier it will be for you to reach your goals. And no one knows your goals better than you do.

After all, you should have the best understanding of where you are and what you would like your life to be in the future. However, having goals is one thing – developing a plan to achieve them is quite another. Here you’ll find this Step Plan for Retirement.

1. Determine Your Goals and Financials Needs

You may think that your retirement allowance and Social Security benefits will be enough, but enough for what? It all depends on what you want to do. You need to determine how much income you will need in retirement. The first step is to write a list of all your expenses.

Establish realistic short-term and long-term retirement financial goals.  Consider two important questions: 

  • Now many more years will I work?
  • How much money will I need to maintain my current lifestyle?

2. Estimate Your Retirement Income

Estimate your retirement income by adding together your:

  • Social Security benefits
  • Employer-sponsored retirement income
  • Income from your personal savings and investments

3. Comparison of income and expenses.

Compare your estimated retirement expenses with your estimated retirement income.  This analysis will help you see where you are and how far you are now and what you may need to do to design a financially secure retirement.

Determine if your retirement income will be enough to meet your expected expenses retirement can be very expensive. Experts tell us you’ll need about 80% of your pre-retirement income to maintain your standard of living when you stop working.

Before you answer, remember, you may be retired for 15 to 20 years or longer. That means that inflation will have 15 or 20 years to eat away at the value of each dollar of income you have. Your pension and Social Security benefits alone may not provide the level of income you’ll need throughout your retirement to allow you the freedom to make the lifestyle choices you would like. You will have to provide the additional retirement income through a savings and/or investment plan.

4. Develop a Savings Plan

You need to begin your savings plan early. No matter what your age, it’s not too early to start financial planning. The sooner you start saving, the more time your money has to grow.
For some, retirement is a long way off. You need to build the foundation for your retirement planning. If you are older, or you don’t have other concerns, you can focus completely on reaching your retirement goals.

5. How to Begin

Establish a realistic minimum that you will save each pay. The only way to get into the savings habit is to plan it.  

  • Try payroll deductions to a credit union, savings account.
  • Take advantage of the Pension Plan.
  • Or, ask your bank to automatically transfer money from your checking account to your savings account.

Financial security takes planning, investing, and commitment. Many people would like to invest but fear the risks. When investing, it’s important to make a conscious decision about what portion of your money will be in relatively safe investments and what portion will be in riskier ventures with possibly a higher payoff.

One way to lessen your risk is to diversify your portfolio. If you own stock, for example, it’s better to own several (in various industries) rather than just one or two. One way to diversify is to purchase shares of a mutual fund which holds many kinds of investments.

It’s also a good idea to keep some of your money in liquid assets, from which it can be easily withdrawn. With all investments, be sure to understand what return-if any- is guaranteed, and what is merely estimated. Find out about sales commissions and management fees before you put money into an investment and take these items into account when figuring your potential return.


Posted by Ardent Editor on Jan 19 2007 in Retirement 101

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