by Anza Goodbar
(last updated November 22, 2011)
Life expectancy is longer now than it has even been. So the funds needed to retire have gone up as a result. It is important to start planning early for your retirement years so you have the opportunity to build the wealth needed to live out your twilight years in comfort.
The first step in creating a retirement plan is determining how much you'll need to live on once you stop working. Most financial advisors say to plan for 30 years. It is important to take in consideration the lifestyle you want to live once you stop generating income. If you have planned well, your living expenses will be relatively low. Hopefully your mortgage will be paid off and you're in good health.
The next step would be to consult with a financial advisor. It is never too early to sit down and chart a course. The more time you have to save for retirement, the more risk you can build into your plan. Everyone has a different threshold for risk, after speaking with an advisor; you will need to determine where your comfort level lies. It is good to have a mix of high, medium and low risk investments in your portfolio. The younger you are when you start planning will determine how aggressive you can be in your risk assessment.
Keep in mind you should have a mix of stocks, bonds, mutual funds and cash. In case you need money quickly, you will want to have some liquid assets available on short notice. This mix will change as you grow older and approach retirement.
Annually, sit down with your advisor and go through your portfolio. Make adjustments as needed. Use the power of compounded interest in an account that you will not touch until retirement. Each year the compounded interest will grow based on your increased balance. The longer you have to contribute the more benefit you will realize.
Don't put off planning for retirement. Your lifestyle in your retirement years will be a reflection of the planning and follow through you invested in your working years. The root of all financial plans is having a good budget, the discipline to follow it, and a propensity for saving for the future. Live within your means and put any surpluses into savings. Set your goals for financial freedom in your retirement years and measure your progress annually to stay on track.
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