Most people think that retirement is the end of their life's journey. Unknown to them, within the period of retirement lies bigger and tougher financial challenges. Retirees are left without a job and are often bombarded with huge hospital and healthcare bills. The uncertain economy of today necessitates effective retirement/financial planning in order for retirees to enjoy the later years of their lives.
Financial experts do not have an exact point of time to start saving and how much to save for retirement. Nevertheless, they are in unison that starting one's retirement planning early will inevitably result into more prosperous retirement years. Ideally, one should start saving and planning for retirement in his early 20s. By doing so, retirees can further capitalise on compound interests and investments.
Determine the amount of money you will need
It is also important that future retirees determine, or at least estimate the amount of money they will need during their retirement years. The estimate depends on a lot of factors including the place where the retiree will retire, the types of deposits and investments, the monthly pensions if any, inflation and the age of retirement.
Contribute to both government and commercial retirement plans
There are numerous retirement plans offered by both the government and commercial institutions including 401(K) and 403(B) plans in the US and social security plans in the United Kingdom. There are also a great number of banks and other financial intermediaries offering retirement planning services. Future retirees must weigh the pros and cons of each retirement pension plan in order to find out what plan suits their needs.
Establish a savings fund
Apart from the retirement pension plans offered by both the government and commercial institutions, future retirees should also save money on a normal bank savings account. Money invested on retirement pension plans can only be withdrawn during one's retirement. Inevitably, there will be instances when sudden and foreseeable expenses will come out of nowhere.
Diversify your investments
There is an old adage which advises people not to put all their eggs in one basket. Diversification is important and necessary in order to minimise risk. Future retirees should position their cash and cash equivalents in different investment vehicles and pension plans. Investing in real properties such as a vacation house or an apartment unit is also a great way to prepare for retirement.