December 17, 2009
Some of us consider the holiday visits and beach travel of the winter season to be much-needed breaks from the daily grind while others of us might find themselves even more stressed out after a weekend with Aunt Harriet or a delayed connecting flight home from Cancun. Still, there's one big break ahead that's a priority on most everyone's calendar -- retirement. Although it may be closer for some than for others, everyone needs to make sure they are financially prepared when the time comes to take a permanent leave from the ranks of the employed. Personal circumstances make planning for retirement different for each individual, but there are several considerations that apply if you break it down by the amount of time you have left until you retire. If you have at least ten years to go until retirement, time is still on your side. One of the most basic principles of investing is putting your money into different investment vehicles and then leaving it there so you can reap the benefits of long-term returns. With more than ten years to invest, you might also be able to afford to take on a little bit more risk with your investments. Probably the biggest advantage of getting an early start is the benefit of compounding earnings. Based on the investments in your retirement portfolio, the money you put in has the potential to earn more money for you - whether through interest payments, dividends, or other means of growth. In many cases, those earnings can be reinvested into your portfolio, further enhancing the total value of your savings and allowing your money the opportunity to "make money" for you. If your retirement is less than ten years away, then it's time to start making subtle adjustments to your investment mix. Because you have less time to work with, you still want to have some investments that offer growth, but you also want to begin looking at preservation of principal through fixed income alternatives such as bonds, which may provide a little more stability in your portfolio and help reduce your overall risk. Finally, when you find yourself officially in the position to retire, you will have a whole different outlook on those funds you have set aside for just that purpose. Instead of making contributions to your retirement funds to help them grow, you'll be looking to maintain income from those investments. You'll likely begin taking distributions from them to pay for your day-to-day expenses. A thorough review of your investments will help you clearly see just how much you have saved, and how you will have to plan your distributions so you don't run short on funds during your retirement. Financial preparation for retirement is something that is different for every individual. To make sure that you're on the right track, take the time now to assess your own situation and see what you can do to make sure you're ready when it's time for you to retire.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).