40, And Only Just Thinking About Retirement?

If you are aged 40 and just thinking about retirement, the experts say that it’s not too late to begin saving, although, you will have to set aside more in order to achieve the required goals over a shorter period. You may want to consider the following step-by-step guide to planning for your retirement:

1. Have an idea when you want to retire. The usual age range is 60-65.

2. Know the lifestyle you want to live, and this will be determined largely by your financial position now and then. Are you going to live as you do now or will you be improving on your current arrangement? Perhaps you are currently living in four-bedroom house in a nice community but you might want to trade this in for an apartment. Maybe you want to travel to places you have never visited. Maybe you will need to trade in the vehicle you now own for an earlier model.

3. Ascertain how much money will be necessary to maintain the lifestyle of choice. It is recommended that a minimum of 60% of your annual pre-retirement salary should be adequate as annual income in retirement. Have a budget that’s just for retirement.

4. Examine your current investments. This should also include your pension, health and life insurance so that you will have an idea how much funds you will receive when you retire. Will you be receiving a pension check each month, and will your life and health insurance be adequate?

5. Acquire the services of a trusted financial adviser. If you don’t already have one, you’ll need to find one soon. Ask your friends and co-workers for referrals.

THE MIDDLE YEARS

As investors shift into the 36 to 45-year-old mid-life grouping, their time horizon will begin to change, and so will their appetite for and tolerance of risk. It is inevitable, therefore, that the investment strategies will also be altered to suit these changes.

Such persons will gradually begin to lower their appetites for speculative stocks, preferring growth-oriented and/or income-generating stocks and bonds with good potential for capital gains but less risk, in addition to safer fixed-income government securities. At this stage, an investor should be looking to solidify the portfolio base and to build for retirement if he/she had started earlier.

If they are just starting, however, these individuals would have to, more than likely, contribute more to achieve their retirement objective. The general advice is that you should project your retirement expenses based on your needs. Think about how you want to live in retirement and how much it will cost. Then calculate how much you must save to supplement social security and other sources of retirement income. Budgeting will be important in this planning process as well.

SOME BASIC RULES

Begin by determining your monthly income and expenses, identifying necessary and discretionary expenses. Some rules to live by include the mantra to save a basic 10% of your salary. Another rule is that your housing costs should be easily within your salary range.

Still another is that you should avoid purchasing motor cars which are expensive to maintain and provide inefficient gas consumption. If your goal changes, then revisit and revise your plans. You will need to do this if market or personal conditions change.

Real estate has historically proven to be a good way to beat inflation. But, do not put all your eggs in one basket. Focus on your asset allocation more than on individual picks.

How do you divide your portfolio between stocks and bonds will have a big impact on your long-term returns. Stocks are best for long-term growth. Stocks have the best chance of achieving high returns over long periods.

Importantly also, do not neglect retirement account options, a tax-free solution for those planning for retirement.

Other means of saving towards retirement include purchasing insurance and savings and investments. Ensure that you purchase adequate health insurance, as ill-health in old age can have a devastating impact on your savings.