Planning for Retirement is Easier than You Think, Yet Saves You Lots of Trouble

By Acceler8now.com Investing Education Team September, 2007


Even if you've just started working and are in your early 20s, you will inexorably get to retirement. That's a fact and another fact is that time flies, as we often say, meaning that if you don't consider thinking ahead today, you will, sooner than you think, be forced to face the reality of that future. If you haven't planned well for it, you could find a lot waiting for you. Most likely, you would have problems contending with them, just because you are ill-prepared. Retirement planning is about preparing for that period when you will exit your job and effectively take a break. For some, it is full time. Others will engage in some lighter work. Today, there are those who want an early break, even while relatively young and strong. That simply says that there is no one mould for retirement. Your retirement style, activities and living conditions will depend on what you are equipped for, which can be by design. That is is the point of retirement planning: retirement lifestyle and conditions by design.

WHAT TO PLAN FOR
You retirement plan is first about setting the tone for the retirement life you want and then about specific estimates of what you must put in place to realise that expectation. You need to also decide viable vehicles for accumulating the resources you will need. Individual needs and desires will vary, but most people will think of the following:

  • when to retire: whether to wait to the statutory or corporate age limit or to call it quits at a prior age;
  • what activities to engage in after retirement and whether income-earning work will be involved;
  • what other goals for retirement: travels, events, etc?
  • health and fitness condition and what health costs are likely in retirement; how will they be borne;
  • projected cost profile of retirement life. What will be the average monthly cost;
  • will I have a house and some basic assets like good car(s) to serve in retirement?
  • when to start saving for retirement, which, ideally, should be immediately;
  • what rate of return I can expect, going forward, on money I invest for retirement, to be able to meet my nest-egg projection?
  • what's the likely impact of inflation to factor into my calculations?
  • how much I must put aside regularly.
  • what savings and investment vehicles will best serve my interest and optimise value and how I will allocate my assets between them.

These questions, to be properly dealt with, will require that you really sit down to think ahead to retirement, taking some critical decisions and figuring out how to achieve the results you desire. That is not an easy call, given that most minds are preoccupied with today's problems and issues, which are in themselves overwhelming. That is, however, the danger. The future doesn't go away, it rather comes nearer each hour. Overlooking these issues could leave you in difficult circumstances, at a time that it would be largely late to make amends.

SOME TIPS TO CONSIDER
Is it possible to do anything that can assure a comfortable life, not only while in active work but also when you have gone into retirement? Definitely, it is and you can find honest people that have worked and retired and yet are been able to live comfortably all through. But it takes a lot of foresight, mental toughness and a rugged determination to ensure that comfort. That means doing the math that it calls for and working hard to actualise the plan. In doing so, do consider these tips:

  • It bears repeating because of how crucial it is: saving the maximum you can, starting as early as possible (better, now) , is the strongest weapon to engage;
  • Inflation is always an enemy of savings you hold for the distant future. You need inflation-beating investments, especially if you have started while young. Stocks offer the best platform, but it's proper to diversify your portfolio, though bearing in mind that deposit interests and even bond earnings may fail to match the inflation rate;
  • Barring any ill-health or physical impairment, there can always be light work of commercial value that you can do in retirement. Plan ahead. That may require learning some other skill or some preparation which you will do well to get when you have to;
  • There are key projects that you might want to undertake - like acquiring a house. These are best planned for and executed prior to retirement. Struggling with big projects in retirement may prove daunting;
  • If you live to a ripe age, there is every likelihood of increasing health challenges and higher cost of health care. Be sure to provide for this, as good health will be at the root of the joy you will find in retirement.

The message is simple: tomorrow will come. It is better not to be caught napping by an occurrence that is as certain as the day.


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