Retirement Planning Issues - Case Study Example

Retirement planning Report and analyze on how much I will need for retirement I am 30 years of age, and I would like to retire at the age of 55 year. Currently am earning a salary of $1200 on monthly basis and can only manage to save $ 100 a month towards my retirement plan, which is equivalent to $ 1200 annually. After doing the calculations, I discovered that I would manage to save $78,491 at maturity. This might not be enough to sustain me for life and therefore, it would be necessary to increase my savings. Doing away with some of the unnecessary expenses will help recover some money, which can be directed to my investment plan. An asset allocation that is right for you to meet your retirement goals. Stocks These are instrument proving that an individual owns part of the company, and has the right to claim on a proportional share in a company’s properties and profit. Unlike other forms of asset such as cash, Stocks over a long period has given investors a higher return. Investing in stocks becomes an essential means of being opportunistic to a growing economy and safeguards your savings when the economy is declining (Susan, 2007). This is because an investor is in a position to know when the economy well performing or not. In this case, one can change the investment portfolio and increase the stock as the dollar begins to get better. This would be the appropriate time to trade some of the stocks and perhaps buy others in large companies (Susan, 2007). The risk and return issues with your retirement plan Financial risks High inflation has become a serious concern and can be upsetting for individuals surviving on a fixed income. It would be necessary for one to invest in asset such as land and premises, whose value is only likely to appreciate. Low interest rates leads to a decreased growth rates for retirement savings and assets, thus resulting to a reduced retirement income. Similarly, high interest rate also has a negative effect on housing and stock markets, which affects the retiree’s disposable income (Susan, 2007). Government policy risk Government rules are dynamic and known to affect individuals’ lives in different ways, which may include the financial condition of retirees (Susan, 2007). Individuals will feel the impact in the event whereby the government decides to increase taxes or reductions in their benefits. Anyone who decides to have a retirement plan should put into consideration that government policies are bound to change at any time. Individuals should know their rights and entitlements to the nation and national authority benefits (Susan, 2007). Healthcare and housing risk Unpredicted health needs and expenses are serious threats to retirees especially where drugs for chronic illnesses are concerned. Most of the aged people are in need of health needs and may require medical attention for various heath related problem at different times, thus affecting their financial plans. An individual may opt to change from living his own and move to houses that combine care and housing after retirement. These houses can be a bit expensive and hard to get and one would have to wait for a long time. The house may also not be in a environmental location that an individual would want, and that becomes a risk to ones retirement plan. Personal and domestic risks Many retired people prefer working for partially or full time in order to increase their income. On the other hand, companies prefer employing old workers because of their job experience, but this may depend on technical abilities, which the old people may not achieve easy or uphold (Tony, 2005). Many retirees get worried that money will run out before the end of their life. This being the case, individuals who manage their retirement funds on their own have to perform a hard task trying to balance the functions. Being vigilant and spending too little may limit a retiree way of living, spending much money increase the risk of running out of money. Passing away of a spouse can also lead to a decrease in retirement benefits or lead to extra financial burden. Where the policyholder dies, the other partner may not handle the finances appropriately. Unpredicted family needs become another issue affecting retirement plan. Many people after retirement find themselves helping family members who may require financial support in cases such long illness (Tony, 2005). The rationale for retirement plan and contingencies to put in place to make sure you meet your goals. Increase savings over time Individuals who earn small salary may not be in a position to save much from their salary at first. Start small and increase your contribution as your salary increases or do way with some of expenses from your budget. Where an individual begins to invest towards a retirement plan at a younger like 24 years of age, one can achieve his goal by contributing little by little over a long period. One can also decide to save more when his/ her children finish school. Make saving a necessity and include it in your monthly budget. In order to increase contributions over time, it would be necessary for an individual to venture in different programs that will bring more income. This could include setting up a business (Daniel, 2006). Reduce taxes and fees Consider whether it would be essential to suspend taxes on your pension contributions using the traditional retirement account or use Roth IRA (Daniel, 2006). Reducing the tax rate in savings ensures that one has much to spend in future. However, a single dollar paid as tax on long lasting savings could cost much in the future. Do away with unimportant expenses so that you can have much to put in your retirement plan. It would also be vital if one first determine the kind of investment to venture into before the implementation process. Go for an investment that will not operate under restrictions or one that involve high fees (Daniel, 2006). Take advantage of employer’s help Utilize the retirement contribution curriculums at the place of work and particularly those programs that involve similar savings for the employer. An individual can have a better opportunity to save much on his own especially if the organization uses the traditional pension. This will one of the significant ways where employees can take advantage of employee’s help. Postpone retirement Working for a longer period creates room for an individual to save more and thus increases the number of days that the savings will lasts. If one does not find it convenient suspending his retirement, then he can still decide to work part time after retirement. Therefore, if one targets to have a huge amount and fails to accomplish that before retirement, it would be better to work for more years in order to hit the target. References Daniel, C. (2006). A Manager’s Guide to Strategic Retirement Plan Management. New York: John Wiley & Sons. Susan, R. (2007). The Everything Guide to Personal Finance for Single Mothers: A Step-By-Step Plan for Achieving Financial Independence. New York: United States Everything Books. Tony, M. (2005). .Investing for Canadians for Dummies. New York: John Wiley & Sons. Read More