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Planning for retirement should begin as early as possible. With some careful
thought, however, the planning process can be started at any time in your
work career. The secret is to actually put together a plan no matter what
your age- the sooner you start, the more time to you will have to build
your investment portfolio for your retirement income.
The chart below illustrates the value of just one contribution of $5,000 at 9% annual return over a 30 year period.
Build a retirement plan that avoids (or at least aticipates) these key
A 2.7% inflation rate can have a large impact on purchasing power. For example, a retiree with roughly $72,000 of living expenses in 2004 would find they need nearly twice ($140,000) as much to meet expenses 25 years later.
Clearly, the amount you spend has an enormous effect on how long your funds will last throughout your retirement. A marginaly higher rate of withdrawal can significantly decrease your years of retirement income. (Example: A portfolio of $1 million with a 4% annual withdrawal rate could provide 6 years more retirement income than a 5% annual withdrawal rate.
Many retirees have taken a conservative approach by investing primarily in bonds and CDs in order to avoid the risk of the stock market. However, these conservative strategies can significantly reduce the opportunity for growing your assets during your retirement years. Though diversification does not ensure a guarantee against loss, it is an extremely usefull strategy that enables risk averse investors to benefit from aditional returns generated by the stock market while minimizing the additional risk
While you won't know how long you will live, many retirees spend more years in retirement than they did working.
Approximately 50% of Americans now turning 65 will be admitted to a nursing home at some point in their lives. Full-service nursing home care is expensive with annual cost estimates ranging from $33,000 to $91,000 depending on location and services.