Maintain a Steady Keel
If you are at the outset of your retirement and are counting on your savings for income, you may be a bit disconcerted about the economy and seek some retirement planning advice. A dipping stock market and housing market, rising crude prices, and the government’s refusal to make meaningful moves, make fears of another recession real and have you worried. What you do not want to do is panic – especially in your investment approach. You need sound retirement advice.
A Panic Move
There are some who will pull all their equity investments and put them into a money market fund or CDs. They do not want to lose any of their previous years’ gains or, at least, any more than they have to this point. They plan to live off their money market interest and count the time until equities begin to rise – perhaps after declining. Unfortunately, neither they nor I know when the worst will occur. That’s acting like a speculator which is only for day traders and specialists. This is not good retirement planning advice to be short term oriented.
At 65 years old, you have an additional life expectancy of twenty one years. That gives a lot of time for inflation to undermine the dollar’s value. Inflation will cut sharply into the value of your nest egg – and its yearly returns if you are completely invested in CDs and money market funds. Better retirement planning advice is to have a long term view consistent with a 21 year life expectancy.
A Better Plan
After setting aside one year’s living expenses in a money market fund, split the balance of your nest egg equally between income and stock market investments. You require those income investments to generate some of your retirement income. Choose a good income generating mutual fund or buy some bonds (more about the differences of individual bonds and bond funds in a later post). Be sure to ladder your bonds (i.e. some for 2 year maturity, some 4 years, some 6 years and so on) so that you can take advantage of rising interest rates over the next few years as the shorter term bonds mature. Laddering will likely smooth out your bond income from interest rate gyrations that may occur.
Do your preparation on your equity investments. Look for stocks or mutual funds that have a history of increase in good times and hold their value in bad (Fortune magazine does an annual ranking of such funds). It is your equity investments that should offset inflation to maintain the overall value of your retirement funds. Be sure to allocate your equity investments so all your eggs are not in the same basket under any economic outcome (i.e. diversify among several industries). Note that mutual funds and stocks are open to risks, including the potential for principal loss but the best retirement advice is to maintain a long term perspective and not react to anything you see or hear on TV or what the market did this week.
Now sit tight and be frugal. Make use of savings tips to stretch your money. Be sure to re-balance your long term investments annually (so that you have half in income/bond investments and half in equities/equity funds) and maintain your ’12 month’ living expense fund refilled. You’ll be around for at least 2 decades after retirement so take some good retirement advice and plan your portfolio for the same long time horizon.
If you are into retirement you should learn to invest your money in a good business so that you won’t fear your future. Make use of saving tips to stretch your money.
I do some equity investment although I haven’t reach the age of retirement. Basically, is the risk & return that you willing to take. High risk = high return. Low risk = low return. That’s the basic thing to consider before doing any investment.
Thank you for bringing up the point about inflation and its affects on retirement!
With all the TRILLIONS of dollars of excess spending in the last 2 years inflation is almost a sure thing. You have to be hedged against it.
Although I’m in my forties, I have broken my investment 2 parts :
1. High risk, mostly consist of equity mutual fund (30%)
2. Low risk for income (70%), consist of government bond with different time dividend, corporate bonds, mutual fund on money market, and a little of CD.
I am handling an Online business here in New Zealand and I recently had a talk with some of my senior executives. It seems like they are investing their money into our Quadracentifiable Website-Builder. They mentioned that it would be best to save early for retirement. Can anyone recommend a plan on how I can save up for this?
I think it is allows a good idea to invest your money a little. Once you have retired, you worked hard enough for your money. Time to let your money work for you for a change. There are a bunch of Instruments you can use. CPA is of course also helpful
Trust deed investing has a pretty high return with a relatively low risk. Something I think is worth looking into.
when you invest, especially for your retirement, you need to be comfortable with the risk you’re taking. No point putting your money in emergeing markets if you can’t sleep at night. At the same time make sure you have sufficient exposure to equities when you’re youn ger and still further away from retirement. I personally invest a lot in property, but in a what I believe to be a long term stable growth market.
I’ve come to realize that bear market investing has different rules than bull market investing. When you follow the rules for investing in a bull market during a bear market, you set yourself up for loss and misery. When you start by telling yourself the truth about what kind of market you are facing today and then follow those rules, life as a retiree is so much easier.
best,
Dave
Like James said, the power is to find good business to invest money. Thanks for interesting posts on blog.
You should look to invest in something you can get a great rate of return on. In Germany and the UK, you could invest in Photovoltaic Installs (solar panels) for your roof to gain money from the feed-in tariff, which will get you an 8-10% ROI per annum.
one should always make the right move when the retirement is nearing or even if you have to face a sudden recession. A good saving or investment never hurts and its advisable that you maintain your income in a proper fruitful way. Thank you for the lovely tips.
I have a couple of years before reaching retirement. Interesting point of view, thanks for posting, you learn something new everyday =)
I think most senior citizens have been panicking these days especially when they discover that their retirement funds did not perform as well as was originally forecasted 30+ years ago. This is where those shady guys with their dodgy ponzi schemes coming in. It’s sad how so many older folk get caught up in these schemes and have to practically starve in their last few years of their life. These are the same people who were productive just a few years ago, contributed to the economy and reared today’s generation of earners. Great advice though. Let’s hope at least one senior citizen takes it and is able to continue to their last day with dignity.
If you put your retirement on that proverbial three-legged stool, there’s a good chance it’s going to collapse. Why? Let’s do a little structural engineering and see how each “leg” is holding up.
My mother is already getting near 60 years old..thanks for the tips..i really sure can learn a lot from all these..I hope retirement will be a great event for all..
My pension switches funds across to a bond / guilt fund to protect it from the stock market, 10% a year pre retirement, I’m hoping it works!
I have invested in Gold and vacant land through out the years. And It has worked for me..
Investing in a business or own one would be best option for those who are near retirement.
Interesting post Bob!
Anyone retiring in the next few years needs to read this great advice, thanks for sharing, very very important stuff.
S
Retirement is a very important thing to plan in advance. I have been working on mine since I was 22 and my twin brother just started, its scary to see how much further ahead of the game I am then he is.
The best way to make sure that you are well taken cared of for retirement is to get into some sort of home based business. Particularly Internet Marketing. This is the business to get into today.
They seem to have finally realized that real estate is possibly the only investment which offers a tight safety-net in today’s volatile and highly unpredictable world economy.
Trust deed investing has a attractive lofty return with a relatively low risk. Something I think is worth looking into.
Hoo boy. My family thinks I should be starting to think about this now because there will be NO social security in the future. Doing my best!
Lately, I have been seriously contemplating on investing as part of my retirement plan. Hopefully, I can get into stocks soon.
– Pinoy TV Channel
Very useful for all those who are about to retire and who retired as they should know how to save money and where to save money.
Get the Quickquid you need
hope retirement will be a great event for all
It is all about the appropriate investment for the age. While I agree that you should not panic and should not move all your assets out of the market and hide them under a matress, but you do need to be smart and measure the risks. As stated, you have to maintain a cash flow for 21 years and will need that nest egg to last.
I had some great advice from my father when I was young and he said that it is never too early to start thinking about retirement. I started saving when I was 21 and I am thankful for his advice. I now own a Christian tshirts company and I am hoping that it will help tremendously with my retirement.
I think one of the most overlooked aspects of retirement planning is to live in an overseas location where there is good health care facilities and where your dollars go further. I think places like Panama, Mexico, and especially Thailand – where I used to live – are wonderful places a retiree can live happily and heathfully. On my blog, I wrote a short article addressing this.
http://www.digitaldrake.com/improve-your-quality-of-life-here-is-how/
Proper investment will help a lot as someone take his/her retirement. That will give an assurance that even if you had let go of your job – the source of your income, you are still able to provide for your needs. You can still live a life that you had back when you are still working.
Anyone retiring in the next few years needs to read this great advice, thanks for sharing, very very important stuff.
My parents are in the verge of retirement and were looking out for grand options..thanks for this at the right time
thanks for your sharing about retirement in uncertain times..
it obviously is very important thing, and its very complicated thing if we don’t know more about it..
Folks say they want to know what the best retirement investment is, but often what they mean is ‘what is the best retirement investment vehicle’, especially during uncertain times.
I would agree that this is very informative since a lot whose retiring is puzzled as to what will happen to them upon retirement. I would think of investing as well if ever I reach that age and perhaps as part of the my activity during those days. We should be wise enough to spend our time and money right now since the world is in crisis.
Hmm..Retirement? it’s quite far to my worries right now, because im just starting a career for my self. However, i must say you must think well your future in the years to come about you retirement and future plans.
Personally, I’d prefer to retire at the age of 60. I’d like to, somehow, enjoy the remaining days that I’ll be spending on Earth. At this age, majority still have the strength to do some leisure activities and sports. I’d like also to spend the retirement benefits that I can get from my company to venture in business.
I agree, figuring out what you would like to do for a retirement is a very good idea. Thats why I started my own company, I do signs and when I say signs I mean that I can do any kind of sign. Such as banners, custom yard signs, aluminum signs, vinyl decals, boat lettering you name it and we can print it. The way I look at it, If a business doesn’t have a sign, thats a sign of no business.
Sooner or later, most of us will plan ahead for our retirement. Thanks for this post,i can use this to be more knowledgeable in saving money for future use.
I think it’s better to have a plan in advance in terms of retirement. It’s not bad to invest for a business as long as it is a legal business. Thanks for sharing some advice hope this could help other to think on what they can do on their retirement. Keep on posting.
It is inevitable that there comes a time in our lives that we reach our retirement age. Some even had their early retirement. After so many years of working, it is expected that after retirement one should already saved something for the future. It entails planning and a thorough thinking on what to do of the being saved. for that I want to thank you for sharing with us some insights on how are we going to spend our money wisely. Hope you will continue giving tips to your readers. More power.
Successful retirement sure does take quite a bit of planning & financial know-how. We’ve got some more articles on our site about both of those here.
The biggest risk that most people face in retirement is running out of money.
Not all people will loose their money that fast. When you retire you should definitely put some or half of your money into something that you could make it grow more. That way you will not worry of loosing it. Plan your retirement properly.
I have a web site where I cover stocks and exchange traded funds under ten dollars. if I were retired I would only invest in value funds.
I would agree that this is very informative since a lot whose retiring is puzzled as to what will happen to them upon retirement. I would think of investing as well if ever I reach that age and perhaps as part of the my activity during those days. We should be wise enough to spend our time and money right now since the world is in crisis. Thanks for the very informative post.
It’s really hard to think on retirement at this point in time. Specially with this recent recession. One has no choice but to just keep working.
There is lots of great information on trust deed investing on Jan Brzeski’s You Tube channel. He has a handful of really informative lectures on there discussing trust deed investing, bridge lending and real estate investing.
At this point in time, and a second recession looming in the horizon, every little bit of advice helps a lot. We really can’t stop working. For those who are jobless at this point, look at online work. There are many out there available if you just look hard enough. Thanks for the great retirement advice.
Mike
Property Management San Jose