What Will You Need for a Comfortable Retirement?

by Redeeming Riches on January 29, 2015

comfortable-retirementRetirement Investment Plans – A Must-Have for the Individual Seeking a Comfortable Retirement

According to financial experts, retirement investment plans are a must-have for the person that has a desire to experience a comfortable retirement. We often hear the phrase, “Knowledge is Power”. This is a key phrase and fact when it comes to planning for retirement. In order to successfully plan for your golden years, you must undergo the process of determining the income that will be needed throughout your retirement and the lifestyle changes that you plan to make. Once these factors have been determined, you must then engage in the process of figuring out what action steps must be taken to achieve your retirement-based financial and lifestyle goals. When creating a retirement financial plan, one of the most productive measures that may be taken in order to achieve success is to learn as much about retirement investment plans as possible, and then actively participate in – at least – one of those plans.

Compound Interest Early On

When reviewing retirement investment plans, one of the main concepts that you will continuously encounter is, “The Power of Compounding”. Essentially, this concept revolves around the belief that, the earlier you start the process of saving for your retirement years – through various methods such as stocks, sponsored plans from your employer, and other financial methods – the longer your money will go to work for you. The longer your money has to work for you, the more money you will be able to obtain for retirement. Generally speaking, younger individuals have the unique capability of taking on investments that carry a higher level of risk. This is because of the fact that there are, typically, more years available to bounce back from any type of losses. Older individuals limit the amount of risk that they expose themselves to – financially speaking – because there are not as many years to recover from complications. As a result of making more conservative-based investments, older individuals frequently experience a much lower earning potential than younger people. While it is never considered to be “too late” to get involved in retirement investment plans, it is advised to start as early in life as possible. As a result of this action step, your initial investment will experience the sheer power associated with compounding and you will be much more financially secure in your golden years.

Retirement Investment Plans – The Options, at a Glance

There are numerous retirement investment plans that you may invest in over the course of your lifetime. In many instances, your retirement financial plan may change. This often occurs as a response to the goals that you have, your tolerance for risks, and the horizon associated with the investment. The following outlines, briefly, the most common investment plans pursued by those that are seeking to accumulate funds for their retirement:

  • Annuities – This is an investment contract between you and a specific insurance company that specifies that periodic payments will be issued for a specific time frame, or, until a certain event – such as death – occurs. If you choose this retirement financial plan, you have two options: you may fund the annuity by paying just one single premium, or, you may pay on it over the course of time. If you purchase an immediate annuity, the payments you will receive start immediately after the initial investment. For retirement purposes, you should opt for investing in a deferred annuity. This allows you to invest what is called the “principal”, and then, that amount continues to grow, as time progresses. Once you reach retirement, you may then start taking withdrawals from the account.
  • Bonds – This is a type of investment in which you, basically, loan money to the issuer – such as a corporation or even the government – for a set period of time. In exchange for this particular loan, the issuer issues an agreement to provide you with a specific interest rate, as far as earnings are concerned. This is paid at regular periods, as outlined by the investment specifications. The interest payments stop when the bond is considered to be “mature”. Once maturity is reached, the original issuer repays the original loan and the face value of the bond is received. If a bond has a high interest rate, it is considered to be a higher risk investment.
  • Cash Investments – These are low-risk options when it comes to retirement investment plans. When choosing these options, your money is readily accessible, you are at low-risk for complications, and you earn small returns that add up to immense profits, over time. Common examples of cash investments include certificates of deposit, guaranteed investment contracts, money market deposit accounts, money market funds, and standard savings accounts.

Concluding Thoughts

While you have been introduced to the most common investment plans for a comfortable retirement, it is important to understand that there are several other options at your disposal. Retirement planning is a process that takes time, a great deal of effort, and many carefully considered and well-thought out decisions. When opting for a retirement financial plan, it is imperative that you consider the advantages, the disadvantages, the rewards, and the overall risks associated with an investment. If you are still unsure of which direction to take, or require more explanation on retirement investment plans, you should make an appointment for a consultation with a qualified professional that specializes in finances and investments for more information.

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