Building Retirement Security
How to build retirement security
Knowing if you have saved enough is just part of retirement
security. The other part involves creating an investment scheme
that will create income without touching your savings.
If you're past 40 or in your 50s, things are a little more
difficult. It's difficult to predict the amount of income that
you'll need during retirement. The needs and interest rates are
bound to vary during that period.
In an investment plan, the traditional advice of putting your
savings in dividend-paying stocks and corporate bonds can't be
relied on anymore. A portfolio like that tends to hurt over time
and risk using your savings too soon.
Have enough savings.
To determine if you have saved enough, there are web tools
available. Make sure that you understand the assumptions in the
tool. You may also hire financial planners to do the numbers for
you instead. Look for one that uses the latest income-planning
tools. Do not make unrealistic assumptions on the returns of the
savings and the investment incomes. Worst, do not make bad
assumptions on your spending.
Be prepared for deep and long recessions. Assume that you'll
spend at least as much as you do now.
Create a portfolio for both growth and income.
As soon as you have enough saved, you need to set up a system
that allows you to put your money into stocks for the long-term,
while putting away enough for fixed income.
Many financial planners advise you to place your retirement
money into three portfolios.
1. The first portfolio is for expected expenses next year.
2. The second portfolio is for fixed income investment whose
income goes to the first one
3. The third portfolio is for stocks that will grow and go into
the first two
A constant flow of income can be generated when the fixed-income
portfolio is diversified into investments with varying maturity.
If you're thinking of how much money to put in, carefully
evaluate your risk tolerance and needs. This helps you determine
how much to save and how much cash should be available. This is
a critical decision, because it can make or break your
retirement.
Try to get the most from your fixed investments. The classic
approach is to diversify your fixed-income portfolio. Treasury
bills and investment-grade Corp-bonds of different maturities
are the most commonly used vehicles.
Here are some alternatives:
1. Treasury bills
2. Corporate bonds
3. Real-Estate investment trusts
4. Convertible bonds
5. Municipal bonds
About the author:
Jay is the web owner of http://www.retirement-in.com Retirement Plan, a
website that provides information and resources about
retirement, from retirement planning and calculation, to state
retirement systems and retirement homes. You can visit his
website at: http://www.retirement-in.com/Arizona Arizona
Retirement
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