Busy saving for your 'golden years'? Or perhaps you haven't
started saving at all and need to know where to start? Iona Minton has
10 useful, and sobering, facts about saving for your retirement...
Face the music
The only way to know if youre on track toward a comfortable retirement
is to estimate your retirement expenses. After youve projected
expenses, you can then calculate how much you need to save. Some financial
planners use software to project how much you will need in retirement
according to your lifestyle. This is an interesting exercise to go through
as it is a great reality check.
Mixing stocks and bonds
There's no sure-fire investment mix how your portfolio is divided
up between stocks and bonds will depend on your tolerance for risk and
when you plan to retire. A sample portfolio for someone who is more
than 20 years from retirement is 70 percent stocks (better returns,
but more volatile) and 30 percent bonds (returns are interest rate linked).
The allocation can be increased or decreased depending on your comfort
The rules they are a changin'
People are living longer and are likely to spend an extra 30 years in
retirement. Corporate pensions are shrinking and are often no longer
sufficient. The standard of living maintained in retirement will depend
a lot on how well you take care of your tax-deferred savings.
Over a long period of time, stocks have a good track record for increasing
your retirement savings. According to most financial planners, stocks
are more likely to help your savings beat the rate of inflation.
Bonds arent always best
Many people that have retired move a lot of their portfolio into bonds.
Over a period of 10 years, inflation can eat away at the purchasing
power of bonds interest payments by more than a third. Some financial
advisors recommend that even retirees in their 70s or 80s keep
20 percent or more of their holdings in equities.
RAs make tax sense
An easy way to increase your retirement savings is to contribute as
much as possible (to a maximum of 15 percent of your gross salary) to
an RA. Theres an immediate tax deduction and if your employer
matches contributions it can be a real boost to your savings.
Think about working in retirement
Working full- or part-time in retirement can benefit you in two ways:
it will reduce the amount you have to save before you retire, and the
income lowers the amount you have to withdraw from your savings to survive.
However, dont bank on this you cannot predict what the
future will hold. Rather keep this as a way to afford a few luxuries.
It may be difficult to save more in retirement so getting the most out
of youre assets is essential. Be creative when looking for ways
to stretch your retirement savings.
Make tax-efficient withdrawals
Pull money from taxable accounts first as much as possible and let accounts
with tax advantages continue to grow. This move can stretch the life
of your savings by several years.
Dont go it alone
Sound retirement investment decisions are vital as you get older and
a good independent financial advisor can be an invaluable resource.
Stay away from high risk or 'too-good-to-be-true' opportunities. Investors
in Masterbond and various cash pyramid schemes will soon tell you that
its virtually impossible to recover from financial setbacks as you near
If you need help with your retirement planning, speak to a certified
financial adviser. You can find a certified adviser in your area through
the Financial Planning Institute.