Financial Planning How to Plan for a Secure Future

Planning for a secure future and retirement.

You will hear all your life that you need to plan for retirement. The baby boomers who have begun to retire have also heard that you shouldn't count on social security to help you out with your retirement planning. Social security was never meant to be a persons only means of retirement. Nor should we rely on the government to provide us with a meaningful source of retirement funds. 

Most people know how important it is to save money. My grandmother told me you need to save for a rainy day. I was pretty young when she imparted these pearls of wisdom. I didn't quite know what she meant at the tender age of 10 years old, but those words stuck with me. I now know what she meant. All you have to do is look around and you know that rainy days have arrived.

As a young person it's important to begin saving as early as possible. Don't wait until you're forty to begin planning for your retirement future. Fewer and fewer companies are offering company provided pension plans and so it's up to each individual to prepare for your retirement future.

Retirement is actually a concept that didn't begin until the 1880s. Germany was the first country to introduce this concept. Prior to that time people worked until they died. Nowadays the majority of people worry if they will have enough money to retire when they reach 65. This seems to be about the normal time for retirement in current times in most countries.

The experts willl tell you that you need to save money for your childern's college educations, you should save at least a month's salary in case of a problem with your job, and save for retirement. Experts will even help you calculate how much money to save if you want to enjoy a certain yearly income during your retirement.

Good returns with low risk. Tell me where you can find that and you and I will be rich people.  Remember that, anytime funds are recommended for you to invest in, there is always the disclaimer that past performance in no guarentee of future returns. Really? We've learned this lesson with the last finanacial meltdown. This isn't the first time this has happened nor will it be the last time. History has a funny way of repeating itself over and over again.

What happens if you get laid off or lose your job when you get within 5 years of retirement and you haven't reached that goal yet? You no longer have time to save additional money to retire. At some point you may be able to find a full or part time job, but in the interim you may have to begin using some of that retirement savings. Pile on the problems with the current economic situation where there is a lot of uncertainty, and the possibility that your investments might drop by 20% to 50% at any given moment and there goes that peaceful retirement concept.

So what's the best course? First of all don't panic. Take a good look at your finances. Become as debt free as possible. Pay off cars, pay off your house, pay off credit cards. The fewer things you owe on the better off you will be. Do not take money from your 401k or, if you have one, your pension plan before the age of 59 ½. Most people know that, if you do this, the government will take a good chunk of your retirement money in penalties and taxes. It's a matter of planning and living within your means, and saving money. Use a pay as you go policy.

When times get tough and jobs get scarce it seems that the older generation is one of the first cuts that companies want to make.  Normally these employees make higher salaries and it makes sense to companies to downsize by eliminating these older positions first.  Puts people who are not quite ready for retirement in an awkward position.  If you are over the age of 59 ½, you might want to think about taking distributions from your pension plan early. You will need to do calculations based on what you feel your life expectancy might be. There are penalties for beginning a pension before the age of 65. Most give a reduced monthly income based on your age. Look at what you would be paid out over your lifetime and see what the break even point might be. Could be that it is a financially sound thing to do.

If you don't feel confident enough to make these kinds of financial decisions on your own, you can hire a financial planner. You will probably get good results if you use a planner that is fee based rather than commission based. You may not want to turn over all your decisions to a planner, but you might want to take advantage of experienced sources to confirm that you are on track with your goals. A finanacial planner can help you to diversify your investments so that you can protect yourself from big losses. They can help you choose quality stocks and mutual funds. Help you to decide what to invest in for the type of risk you are willing to take. They can set you on a plan that is configured to cover different phases during your lifetime.

Don't think that because you are young that you shouldn't start saving now. No matter what your age it's important to save money. Too many people delay this because they think they have plenty of time. The years fly by and before you know it you discover that retirement is about 10 years away. You don't know what the economic climate will be at that time. Nothing in life is certain, but we know we grow old, so with this being inevitable, we plan for the future. Why else do we work so hard all of our lives?


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