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Retirement Planning: Why Plan For Retirement?

Uncertainty of Social Security and Pension Benefits

  • The aging population is causing fewer contributors.
  • More people are retiring due to increased longevity.
  • Corporate collapses, such as bankruptcy of Enron negatively affect private pension plans.
  • Defined pension plans do also fail from time to time.
  • Many employers shift from defined-benefit to defined-contribution plans.

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Retirement Planning: Why Plan For Retirement?

Retirement Planning: Why Plan For Retirement?

https://www.investopedia.com/university/retirement/retirement1.asp

investopedia.com

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Key Ideas

Uncertainty of Social Security and Pension Benefits

  • The aging population is causing fewer contributors.
  • More people are retiring due to increased longevity.
  • Corporate collapses, such as bankruptcy of Enron negatively affect private pension plans.
  • Defined pension plans do also fail from time to time.
  • Many employers shift from defined-benefit to defined-contribution plans.

Unforeseen Medical Expenses

Old age typically brings medical problems and increased healthcare expenses.

Living out your retirement years in comfort while also covering your medical expenses may turn out to be a burden too large to bear.

Estate Planning

Without a well-planned retirement nest egg, you may be forced to liquidate your assets in order to cover your expenses during your retirement years.

The Flexibility to Deal with Changes

Unforeseen illnesses, the financial needs of your dependents, and the uncertainty of Social Security and pension systems are but a few of the factors at play.

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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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Why you should plan to plan ahead for retirement.
Why you should plan to plan ahead for retirement.
  • Getting stuck in the savings mindset. Saving should be formed as a habit. The amount saved can be increased over time.
  • Medical emergencies. With increasing age comes...