Retirement Planning

Retirement planning should include determining time horizons, estimating expenses, calculating required after-tax returns, assessing risk tolerance, and performing estate planning. Start planning for retirement as soon as possible to take advantage of the power of compounding.

Plananing for retirement

• Planning should include determining time horizons, estimating expenses, calculating required after-tax returns, assessing risk tolerance, and performing estate planning.
• Start planning for retirement as soon as possible to take advantage of the power of compounding.
• Younger investors can take more risks with their investments, while investors nearing retirement should be more conservative.
• Retirement plans evolve over the years, meaning portfolios must be rebalanced and estate plans updated as needed.
• Occupation, family size, retirement age, and post-retirement goals all play a role in retirement planning.

How much do you need to save for retirement?

Before anyone crunches the numbers on their retirement goals, they need to know how much money they need to save. Naturally, this depends on many situational factors such as annual income and the age at which they intend to retire.

• Steps for planning for retirement

1. Understand your time horizon

Your current age and expected retirement age lay the foundation for an effective retirement strategy. The longer the time from today to retirement, the higher the level of risk your portfolio can tolerate.

2. Determining retirement spending needs

Having realistic expectations about your post-retirement spending habits will help you define the size of the retirement portfolio you need. Most people believe that after retirement, their annual spending will be only 70-80% of what they spent before.

3. Calculate the rate of return on investment after tax

Once the expected time horizons and cost requirements are determined, the real after-tax rate of return must be calculated to assess the feasibility of the portfolio to generate the required income.

4. Investment goals

Whether you are a professional money manager responsible for investment decisions, an appropriate portfolio allocation that balances risk aversion concerns and return goals is arguably the most important step in retirement planning.

5. Stay on top of estate planning

Estate planning is another key step in a complete retirement plan and each aspect requires the expertise of various professionals such as lawyers and accountants in that particular field.

• Importance of plans for retirement

Retirement planning is important because it can help you avoid running out of money in retirement. Your plan can help you calculate the rate of return you need on your investment, how much risk you should take, and how much income you can safely withdraw from your portfolio.

• Reference

https://www.google.com/search?q=importance+plan+for+retirement   https://www.investopedia.com/articles/retirement/11/5-steps-to-retirement-plan