What do you think is the most important investment decision you will probably ever make in your life? It is financial planning for retirement. Retirement planning is a big thing and having a proper finance for it is even more important. Here are some tips that can help you to make a proper financial plan for your retirement.
Financial planning for retirement relies a lot on balancing risk and reward. Any investment you do will carry some element of risk and of course the higher the rate of reward the higher the element of risk will be. This risk is what investors must fight with each day. Will the money you spend pay off with you making either the same amount or more money?
When doing financial planning there are two forms of investments you should consider. The first is your house. If you build equity in your house and pay off your mortgage you will be able to drop your monthly expenses and eventually be only paying property taxes! Americans spend about 30% of their monthly income on housing expenses so if you get rid of most of that expense you will already be able to begin saving money.
The other form of investment is a 401(k) plan. A 401(k) plan has many different advantages for taxes and has the employer matching funds. The benefits of a 401(k) plan are to long to add into this article so you will have to go to a different article for that, but know there are many benefits.
If you are young, in your 20s and 30s and are beginning to think about your retirement you are in a good position. When you are setting out your 401(k) allotments you should always allocate as much money as you can to force your employer to match the funds at the full rate making you the most money. You should also consider taking some risks such as stocks and mutual fund portfolios to help you make the most money you can.
If you are older you should try to take less risks and maybe invest in bonds that will guarantee payouts over time with lower interest rates. When your young and you lose money it is only a minor setback but when your in your 50s and 60s it is a major setback that is a disaster for you.
If you are in your 60s and are doing some retirement planning a good rule is about 70% of your retirement income should be in bonds with about 20% of that income in growth funds and the last 10% being in long range return funds.
Financial planning for retirement is a big thing to do no matter what age and is something you should consider doing now. With these tips you should be set to get good retirement planning and financial planning done.