Planning for Retirement

One of the challenges of retirement planning is the difficulty in predicting the future. Factors like Social Security, pension plans, food and housing needs must all be taken into account and the unexpected must be accounted for. As a first step in planning for retirement, you should estimate how much your retirement is likely to "cost."

You can estimate that your future lifestyle would require 60%, 70% or 80% of your present annual income. To decide this, consider these widely held assumptions and how they could affect you:

  • Your home loan may be paid off and you may move into a smaller home at retirement.
  • Expenses for your children will have decreased, including the major responsibility of paying for education.
  • The cost for health care will probably rise and so may your need for medical care.
  • Most life insurance policies are paid up by age 65 and cash value policies actually start paying money back to you.
  • Leisure and travel costs may increase.

Another variable that you must contend with as you plan your retirement is inflation. Once you retire and find yourself without a salary that keeps up with the cost of living, you'll become keenly aware of how inflation can erode the assets you have. While we can't predict the future, it's very likely that the cost of goods and services will increase and you'll need more at retirement than you do now to enjoy the same things. You don't want to reduce your standard of living and you certainly don't want to run out of money. Determining the amount you can reasonably expect to receive from Social Security is also important to estimate your retirement income. The normal retirement age at which full benefits are payable is age 61 today but will probably rise in the coming years.

Once you have an idea of what your retirement needs might be, and the retirement savings options available to you, you can start outlining your investment plan.  The strategy you choose for developing a retirement portfolio should be based on a variety of factors. You need to carefully consider:

  • How much time do you have to achieve your goal?
  • How much risk are you comfortable taking?
  • How much can you afford to invest for retirement?
  • How much will you need to set aside for other goals?
  • How much time and effort do you want to put forth to manage your investments?

You need to develop a retirement strategy that fits your personal investment philosophy and stage of life.   Of all the factors that must be considered, the amount of time you have to save for retirement and your tolerance for risk are the most influential in determining what types of investments to consider. You should determine how willing you are to take higher risk to achieve higher returns on your investments. If you are young, you can consider the many investments that are designed to take higher risks to achieve higher returns over time. However, as you approach retirement age, you should try to avoid risk and focus on income, safety and preservation of capital.

There are various ways to help you invest towards retirement.  This could be done either by regular contributions or by a lump sum contribution.  Your investment objectives and personal circumstances and needs are to be discussed with your Investment Services Officer or Financial Advisor so you can determine which plan will suit you best.

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