RETIREMENT AND PLANNING (part one) First Steps
After dedicating the greater part of your life to making a profit through diligent and consistent work, securing financial security for the days ahead just doesn’t happen overnight. Planning for your retirement is a step by step process involving commitment and sacrifice. Many active workers today are yet to grasp the magnitude of the retirement age and ignorant of the amount of money and investments that should be in place. Saving for the rainy day is a rewarding habit, as it protects us against eventualities and unforeseen circumstances. Yes it is good to save, but isn’t target based savings better? In saving we put money away to use at a later date. Goal oriented savings help us estimate the time and amount we need to put away in order to accomplish the objectives we have outlined. Note that the key words in saving are objective, time and amount. Planning your
retirement starts with saving and knowing what and the amount you will need to enable you get by when the time comes. As with any objective, the intricacies involved are vital in making your retirement plans. It is easy to wake up one morning and say to myself, I have to buy a car. In buying a car there are considerations such as the type of car, the practicality of the car, maintenance cost, second hand value and the time it will take to raise the amount needed to purchase the vehicle. The same also goes in planning your retirement. It is estimated that in order to maintain your current standard of living during retirement, you will need to put away between 70% - 90% of your current income. So then how do you go about planning when so much is going into savings? Don’t be alarmed by the percentage that needs to go into savings, there is an easy way to solve the debacle presented and that is through investments. Liquid money by default depreciates in value over time, by investing you get to get returns on your savings and prevent the depreciation you would have otherwise subjected your money to if you just put it under the mattress. Now you can envision the retirement age and have a vague idea of what you will need and amount of sacrifice and commitment needed in achieving your objective. The next step after this is figuring out the ways available that best suite you in accomplishing your objectives. One of the many ways to go about this is through Employer-Sponsored Retirement Plans. Employer sponsored retirement plans are saving plans provided by your employer that involve a certain amount of money deducted from your monthly salaries to be paid back in lump sum at a later date. This is a very convenient and effective way of saving money and has many advantages among which is tax breaks. You should get the facts right and know your eligibility to partake in your companies sponsored retirement program. Also know the minimum amount to be contributed and how much you are willing to put into that savings program. In the second part of this article I would be talking about pension schemes made available by your employer and basic investment principles.