Navigating the minefield of retirement planning - Baltimore Post-ExaminerBaltimore Post-Examiner

Navigating the minefield of retirement planning

Coming back to England recently I’ve been spending time with my parents, naturally. And it’s made me think about what a retired life would be like. My dad says it’s all about gold and my mom says it’s all about making sure he goes out to play golf. They drink too much, they have fun, they keep busy, they keep active. But what is retirement really like and how might I plan for it? Here’s some sage advice.

When most people worked in the same job for life and pension plans were all very similar, planning for retirement used to be a reasonably simple task. Things have since changed dramatically and nowadays individuals are expected to take more responsibility for their own financial planning. There are lots of different options and while, theoretically, this may be a good thing, it can often feel overwhelming. As a result, many individuals delay making a start on retirement plans or investments and end up leaving it too late. It doesn’t need to be like that. Stripped down to the basics, this is something that anybody can understand.

Why planning matters

Rather than just putting money aside in a savings account – which won’t see that money grow much and creates a fund it can be very tempting to dip into – making a proper retirement plan guarantees some degree of financial stability in later life. The sooner it’s done, the more money there will be when the time comes. A plan like this should be comprehensive, incorporating any existing pension arrangements, corporate and private (and there’s no reason not to have both). It’s a good idea to work out a monthly budget to establish how much can be put into the retirement fund each payday. Keeping a separate savings pot to use for immediate concerns, like house repairs or vacations, makes it easier to resist touching the growing fund. Making a will ensures that hard work won’t be wasted and the family will benefit in the event of your unexpected death.

Investing for retirement

An alternative to retirement planning is retirement investing. Many people choose to do both. Taking this approach involves putting money into long-term investments that will grow over time, and these can prove significantly more lucrative than traditional investments made over just a few months or years. Forbes writer Ken Fisher recommends establishing an investment benchmark that it’s possible to stick to and developing the rest of the investment strategy around that, with an established balance of stocks, bonds, cash and other assets (such as property). There’s a handy guide with 99 tips from Ken Fisher free online, which makes a good starting point for understanding investment strategies.

Bradford on Avon.

Bradford on Avon.

Help and advice

When it comes to the fundamentals of retirement planning, many banks offer free advice to their customers, but when the issue at hand is investments it’s better to turn to a specialist company. Ken Fisher’s company, Fisher Investments, specializes in retirement investing and has many years of experience helping people develop portfolios that suit their particular needs. Although professional investment portfolio management costs money it usually pays for itself quite quickly. The professional’s expertise and ability to keep up with a market that is constantly in flux means better choices will be made and better returns achieved. It also decreases the risk of the inexperienced investor being tempted to put too much money into potentially high yield stocks that also carry a high risk.

How much will you need?

Many people underestimate how much money they need in retirement. There are several reasons for this. Firstly, they may underestimate how long they will live, as medical advances mean that lifespans are increasing all the time. Secondly, they may assume they’ll always be able-bodied and of sound mind – in fact, the majority of people develop some care needs in old age, and it’s advisable to have an insurance policy that accounts for this. Thirdly, even if they work out in detail how much it will cost to maintain the lifestyle they want year after year, they often forget to account for inflation. What seems like an adequate sum of money today may buy only half as much in 40 years’ time.

Besides careful planning, there are two ways to account for this. The first is to invest money in a retirement annuity that guarantees a minimum income every year until death – looking at inflation forecasts to ensure that income will be adequate. The second is to develop an investment portfolio that will keep on producing income for an indefinite amount of time. In the latter case, this will require ongoing management, so some people prefer to have it looked after by a professional; others find that, confusing though it may seem to begin with, they get good at it themselves over time.

Although all the competing agendas around retirement planning and the adverts on TV may make it sound impossibly complicated, the basics are really quite simple. It’s well worth taking the time to understand them in order to be able to take control of personal finance and approach retirement from a position of confidence.


About the author

Claire Bolden

Claire Bolden McGill is a British expat who lived in Maryland for three years and moved back to the UK in August 2015. Claire wrote about her life as a British expat on the East Coast and now works in travel and hospitality PR in the UK. She still finds time to blog about her repatriation and the reverse culture shock that ensued - and she still hasn't finished that novel, but she's working on it. You can contact Claire via twitter on @clairebmcgill or via her blog From America to England. Contact the author.
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