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Why One of the Biggest Perks of Retirement Planning Has Nothing to Do With Retirement
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Smart retirement planning boils down to a few simple truths.
- Time is on your side. The earlier you start saving money, the more time you give compounding to work for you.
- Take risks when you're young. Although stocks are three times more volatile than government bonds, it earns nearly twice the average annual return.
- Don't pay high fees for fancy accounts. Every dollar paid to a fund manager is a dollar that can't compound. Index funds charge a fraction of an equity mutual fund because they don't hire high-priced investment managers to pick stocks.
- It's not about retirement. Saving for retirement might be the goal, but following these steps could provide general financial security.
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Early Mistakes, Late Start & Future Hurdles.
Savings and investments should be part of a monthly budget even when young or just starting a career.
You cannot save enough if you are waiting until your late 30's before...
Myth vs. Reality in Retirement Planning
- I’m not that old: It’s not about NOW but saving for your old days when you can no longer work full time.
- I’ll wait for a lump sum is just an excuse to postpone planning or procrastinate.
- Assumed Family/External Support: It’s better to be prepared for eventualities and have contingency funds in hand.
- Financial Requirements Decrease: Medical costs increase with age. Inflation and other factors might also come into play.
- I will not live that long or I won’t retire: People tend to live longer, but they will suffer from medical ailments.
Retirement Goals
To have a secure and financially independent retired life during your golden years with regular post retirement income, a corpus of savings/investments and a safe shelter or home.
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Common investment questions
Two of the most common investment questions are "what do you invest in " and "what are the best investing strategies"?
The best investing strategies are...
Shady investment advice
Bad investing advice can come from many quarters, such as wealth expos or financial advisors. If anyone promises you any type of return over 12%, 99% of the time, they are probably playing you.
There are great financial advisors out there, but many people who sell investment products just want your money. However, it's not that hard to invest for yourself.
How to avoid bad investment advice
- Never buy a financial or investing product from someone you just met.
- Getting returns over 12% per year is ridiculously hard. If it sounds too good to be true, it is.
- If you don't understand it, don't invest in it.
- If one of your friends recommends an investment that's making them a lot of money, they are probably suckers too. If you see the "results not typical" on any marketing materials, move on.
- There are no "secrets of the super-wealthy" that anyone will sell you for $500 or that you can take advantage of unless you have hundreds of thousands of dollars.
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Financial Success: Start Early
Financial success is dependent on good habits practised over a long period of time.
You can still have a positive impact on your financial future if you're starting lat...
The Power of Compounding
At first glance, compounding does not look remarkable. However, looking at compounding in action, you will notice a few things.
Consider, for example, investing in stocks at an average real return of 6.8%. (It is inflation-adjusted.) During the first few years, compounding doesn't really do much. After ten years, your initial investment would nearly double. After 16 years, your initial investment would triple, and in 20 years, it will quadruple. By year 40, you're earning more than your initial investment every year.
The Importance Of Saving
Your investment returns are less important than your investment contributions. That is to say, how much you invest matters more than where you invest.
The more you contribute, the more there is to compound.