People work for years in order to enjoy their retirement, but taking the final step and actually retiring can seem daunting for many. When the time comes to retire they worry about where best to invest their hard earned savings and how much can be spent each month without dipping into their capital. It’s likely that everyone has questions about their family’s future financial security, so it’s important that sound and informed investment decisions are taken now that will lead to a worry-free retirement; after all, there is more to retirement than simply earning a pension. By planning in advance retirement can be the happiest period of anyone’s life, a time when people can focus on doing the things they love and spending time with those who mean the most. Here are a few things to consider.
Annuities
Annuities are great for people who worry that they will outlive their savings. However, some retirees are equally concerned that their money might outlive them. Annuities require retirees to give a sum of money to insurance companies, who then pay out a set monthly amount for the duration of their retirement. But what happens if the individual dies before they pay it all out? Some people might feel cheated, regret not spending everything they had or giving the rest to their family, before they died. Consider the pros and cons of annuities before investing in one. In complex situations like these, it’s usually best to talk with expert advisers such as Fisher Investments.
Tax breaks
It’s not just what where the investment is made, but how it is structured that can impact on an individual’s retirement. This might seem obvious to some, but everyone needs to be sure they are taking full advantage of the tax benefits available. For example, 401(k) and IRA accounts allow tax-deferred earnings to compound, giving the investor a serious tax advantage over other types of savings accounts. Therefore, it is crucial that advantage is taken of plans such as those offered by employers many years before it’s actually time to retire.
Mix stocks and bonds
Invest in a mix of stocks and bonds. The do-it-yourself investor might be tempted first to invest heavily in bonds because of their ease of access and security. Bonds are a great option for long-term return, but the payout is not great and they can be seriously hindered by inflation, which is sure to be an issue over an extended period. What at first might seem like a decent return might not be so great twenty years down the road and most retirees, thankfully, live longer than they think they will when they first retire. For this reason, it’s important to also invest in stocks. Stocks might be a bit riskier, but they offset the effect of inflation, but don’t be intimidated. There are many great mutual funds that do all the hard work; in a sense making it easy for those with little knowledge of the markets to still do their own investing.
Know the expenses
Many people are not aware that their 401(k) s or IRAs cost money, often times a significant amount. In fact, there are operating costs associated with nearly all forms of investments. When choosing a plan, research the costs first. A 4% fee might not seem high at first, but over decades it can add up to a lot less money in your pockets. High-fee funds might promise greater expertise or better returns, but realistically, lower-cost funds are almost always the better option in the long run. These are not the only expenses that need to be considered, however. Before retiring it will be necessary to determine average daily living expenses. What type of a lifestyle can they expect to lead and what about medical expenses? It’s often best to sit down with a professional retirement expert to plot these things out, since it can be a lot of information to process for one person. Remember, the future is unpredictable, so it is essential to make plans for the unexpected.
Keep a level head
Retirement is supposed to be a time to enjoy, not a period of constant worry. It is a time to relax, so plan early and reap the rewards down the road. Focus on the things that can be controlled and don’t stress about the things that can’t.
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