Are you ready for retirement?

There are two ways to face the future – one with anticipation, the other with apprehension. Which will yours be?

The issue of retirement can create those mixed feelings. The prospect of setting your own schedule and spending time on favourite hobbies may make you yearn for your eventual retirement. On the other hand, uncertainty about the future is likely to make you a bit apprehensive. You can reduce yours fears by taking a realistic look at how well you prepare for retirement.{{more}} Money is the biggest retirement concern most people have, so having a clear picture of your future finances will go a long way toward putting your mind at ease.

Start early

Unfortunately, some people do not start thinking about financial plans for retirement until they are just about ready to retire. You can avoid having retirement sneak up on you by making plans early. The sooner you start preparing and the more thoroughly you plan, the more likely you are to enjoy yourself when it actually comes.

Planning a comfortable retirement in the 21st century requires a new approach. This is not your father’s retirement. The old model of the Golden Years – in which, at age 60 or so, we went from working to not working, collected a corporate pension and spent our time on the back porch – has become as outdated as using telegrams to send messages.

In the new millennium, the standard of living we enjoy in retirement hinges not so much on a company pension plan, but on how much we take advantage of existing investments options. Statistics have shown that we are living longer, staying healthier and remaining more active after retirement. In short, retirement is a whole new gig that offers many possibilities, but also demands more careful planning on our part to be able to take advantage of the multitude of opportunities. The simple truth is that retirement, if not properly managed, can be a disaster.

Six steps to retirement

1. Know your retirement needs. Experts estimate that you’ll need a minimum 70 per cent of your pre-retirement income to maintain the standard of living you currently enjoy. Do a retirement worksheet, listing all your expenses for both pre-retirement and post retirement. Remember some expenses like medical, home repairs, will increase, while some expenses, such as children’s education, will decrease.

2. Start now, set goals, and stick to them. Start early. The sooner you begin saving, the more time your money has to grow. Each year the gains build on the previous year’s gains – that’s the power of compounding. Use it to accumulate your wealth. Make retirement saving a high priority. Devise a plan, stick to it, and set goals for yourself.

If, for example, you estimate that your retirement amount should be $500,000, the chart indicates how much you would have to save or invest monthly, at a10 per cent annual rate of return.

Years to Retirement Savings Required Monthly Savings Required Annually

50 $28.62 $ 343.44

40 $ 79.41 $ 952.92

30 $219.36 $2,632.32

20 $653.00 $7,836.00

10 $2,420.70 $29,048.40

3. Do a Risk Assessment. With the help of a financial advisor, do a risk assessment that will help you to determine your tolerance to risk.

4. Consider Basic Investment Principles. How you save can be as important as how much you save. Inflation and the types of investment you make play important roles in how much you will need to save for retirement.

5. Mix Your Portfolio. Based on your risk assessment you should try to allocate your portfolio to give you the best returns. In addition to your tolerance to risk, the amount of years that you have for investment, i.e. before retirement, will also influence your mix.

6. Review Your Position. You will need to continuously assess your progress and adjust accordingly to meet your goals. It is therefore important that you have financial information. Talk to your employer, your bank, or a financial advisor. Ask questions and make sure the answers make sense to you. Financial security and knowledge go hand in hand.

These tips should point you in the right direction. Remember financial security does not just happen; it takes planning, commitment and money. Putting away money for retirement is like giving yourself a raise. It is money that gives you freedom when you need it – and deserve it.

Contact First Citizens Investments Services today to start planning for your retirement! (Submitted in support of Financial Information Month)