Life Insurance and Retirement Planning - Assignment Example

These financial areas include investment into bonds/stocks, purchasing a real estate, insurance coverage as well as income-generating activities. My ultimate aim is to create a portfolio of such assets so that consistent cash flow is being delivered to me throughout my retirement life. Out of the $100,000/- I would allocate $100,000 to purchase 30 years bonds of a large corporation which can provide return equivalent to the return of 5% to 7% whereas $100,000/- of existing financial resources are going to be invested into the purchase of stocks of a blue-chip company having a history of providing consistent stream of dividends.

I also intend to buy a small piece of real estate at the total investment of $250,000 whereas I also intend to purchase an insurance cover which not only pays for my medical expenses but guarantees a consistent annuity amount over the period of retirement life. A bond is long term security that provides a constant/variable rate of return called coupon over the period of its life besides returning back the investment made into it. Bonds are considered less risky than stocks as they guarantee a consistent fixed income over the period of investment and offer priority rights to the bondholders in case of liquidation.

They are considered as the best financial securities for planning retirement. (Investopedia, 2008). Stocks, on the other hand, are the shares in a company's equity and holders are given the status of the shareholder in the business. They are riskier than bonds because the return on them is not variable but also subject to fluctuations in the financial position of the company. Further, from a retirement planning point of view, this can be riskier as it is not necessary and obligatory for the company to pay dividends to its shareholders.

(Investopedia, 2008). Investing in real estate is now considered as one of the most lucrative forms of investment as it not only appreciate in value but also provide a consistent stream of rental income over the contractual period. Insurance covers, especially life insurance, provide you an opportunity to protect your family in case of your death and after the retirement can also guarantee you a consistent stream of income out of the insurance premium you have accrued over the period of time. (About.com, 2008).

Conclusion Preparing for after retirement period is one of the most critical issues in one's life when approaching that phase of your life where you may not be able to work as good as you were able to do in your youth. It is therefore of critical importance that personal financial planning for the future should be strong enough to ensure that all your financial needs are fulfilled. Investing in various real as well as financial assets is an excellent way through which one can plan to achieve a good mix of assets guaranteeing the overall achievement of the financial goals of a person.