IT HAUNTS you. You avoid the topic like the plague. But if you don't get a grip on it, you can kiss retirement goodbye. Whatever the reason, the average person does not have any idea of how much money they will need to maintain a comfortable retirement. Achieving this objective requires planning.
With the increase in life expectancy, due to improved health care and standard of living, retirees are living an additional 20-30 years.
The implications of this on your chance for financial independence are profound, as at some stage of your life, you will start depleting your nest egg. Sure you may be contributing to your company's pension plan or the government's National Insurance Scheme (NIS), but do you think this will adequately help you to retire comfortably? Pension disbursements from these schemes are usually a fixed amount, which is eroded by inflation over time.
Simply put, the lifestyle you desire for your retirement depends on the plans you put in place today to build that retirement nest egg.
BUILDING THE
RETIREMENT NEST EGG
Ideally, your retirement plans should begin with your first job's pay cheque. Early preparation gives you a head-start in retiring financially secure. With the effect of compounding, a dollar invested for 40 years gives a higher return than a dollar invested for 10 years. The sooner you start, the greater the returns will be for retirement. Therefore, whether you are 20 or 49 years old, if you have not already started, today, this very minute, is the best time to start.
PASSIVE INCOME
FOR RETIREMENT
Passive income means earning an income without working for it, or put another way, having your money or asset working for you. With the average life expectancy of the population being approximately 80 years, this passive income earnings capability will serve as an integral part of a retiree's income stream. The fact is, a retiree's income-earning capabilities diminish during retirement, while his consumption pattern increases. This leads to a depletion of one's retirement nest egg.
BUILDING YOUR PASSIVE INCOME FOR RETIREMENT
The funds invested for your retirement must never be used for consumption. It's tempting, but find another source of funds to spend. The aim is to increase the value of the investment. Choosing the right investment options, with the assistance of an investment adviser, is the next step in the process. The use of your regular savings accounts or fixed income investments, will prove to be an insufficient investment option as inflation reduces the value of these investment options, especially during rapid inflation. Savings accounts and fixed income investments are good vehicles of investment to get you to the wealth accumulation stage of your retirement plan, but in terms of store of value and wealth creation for retirement, they are not.
Once you are at the wealth accumulation stage of your retirement plan, your retirement portfolio should include appreciating and income-generating assets, such as an equity portfolio consisting of blue-chip stocks with consistent dividend payment; a tax-free U.S. dollar global bond portfolio with semi-annual interest payments, and real estate that provides monthly rental income.
These assets provide a consistent income stream, and are also an excellent store of value and hedge against inflation. The income generated from these assets should be reinvested to increase the asset base of your retirement plan. It is not until you retire that the income generated from the assets should be used for consumption purposes.
However, your retirement plan must not be cast in stone, and just like any other portfolio, it must be reviewed and realigned if needs be, factoring current market conditions and future expectations.
"Retirement is wonderful if you have two essentials: much to live on and much to live for."
E. C. McKenzie
To further discuss investing and the many options we have available, contact DB&G at info@mydbg.com or toll free at 1-888-CALL DBG.
Disclaimer: All information contained in this article has been obtained from sources that DB&G believes to be accurate and reliable. All opinions and estimates constitute the author's judgment as of the date of the article. No warranty as to the accuracy, timeliness or completeness of this article and as to the opinions based thereon is given or made by DB&G. DB&G and/or its employees or directors and/or any associated person may have an interest in, or interest in the acquisition or disposal of, the securities or class of securities mentioned herein. Call 1-888- CALL DBG if in doubt about the content of this article. Decisions based on information contained in this article are your sole responsibility.
