RETIREMENT PLANNING: A Guide To Secure Your Financial Future 

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retirement plannining a guide to secure your financial future

How will you feel to see that you can secure your financial future through Retirement Planning

Yeah, everyone (including you) wants to create a financial plan that will assist or support their lifestyle and expenses in the future…, that is, after they have retired from their job career.

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I am sure you also want that. 

Such a happy outcome, makes some people consider some possibilities or meditate on the outcome of their financial future.

Things like this give rise to the question…, “How Can I Secure My Financial Future Through Retirement Planning”?

You are not alone on this.

Below is what you will learn from this article

What You Will Learn 

  • Why is retirement planning important
  • How you will benefit from the type of retirement planning
  • Ways you can manage your retirement savings and investment
  • How to get away with the risk involved with retirement planning 

Why Is Retirement Planning Important?

From the overall view of retirement planning or retirement saving…

Retirement saving is a saving plan in which part of the money that you earn is invested in the plan for you to use when you retire [Collins Dictionary].

Or, it’s a systematic plan made or kept by an individual for setting aside income for their future retirement [Dictionary]. 

The reason why this is important and why you should care it’s that.. when their money management for retirement is not properly planned, it will affect…

  • Family
  • Personal happiness

FAMILY AND RELATIONSHIP

family relationship

When you sow your retirement savings, you will reap it. One of the biggest issues with retired people is that…, they spend much of their time from their job careers forgetting or neglecting their family relationships as a valuable asset.

When money management for retirement is not well planned, it will cause psychological issues in the family. With that, the family will have to adjust to the lifestyle changes of not making proper planning for their financial retirement.

Meaning, their new phase of life may be enjoyable or hateful.

But if one should recognize the benefit of retirement before the age of retirement, it will help the family to appreciate the new lifestyle phase that will serve them better.

When it comes to family and relationships, retirement is very important.

PERSONAL HAPPINESS

personal happiness

Retirement truly improves one’s personal happiness. It has a great impact mostly on those with a college degree or less, those with more or less children.

Proper retirement saving brings better health status which in turn reduces the side effect of retirement planning. 

Proper retirement can make one spend time on those important things for their friends and family. That brings personal happiness because there was a proper retirement saving plan. 

And that will help them not experience the negative consequences of retirement if there wasn’t proper money management for retirement.

Retirement has great importance in the aspect of personal happiness.

For more information about the importance of retirement planning, you can check RETIREMENT PLANNING: Make The Most Out Of Your Retire Life and Importance Of Retirement Planning.

The next paragraph will discuss the type of retirement plan and its benefits.

Type Of Retirement Plan And Their Benefits

There are four retirement plans and their benefits that you will consider which are..

  1. 401k Saving Plan
  2. Roth IRA 
  3. Traditional IRA Account 
  4. Workplace Pension Plan

401k SAVING PLAN: The Standard Retirement Plan For Employee 

employee retirement plan

A 401k saving plan is a type of financial retirement plan which is organized or sponsored by the employer, in which eligible employees can contribute directly from their paycheck to an individual account. This type of saving plan is sometimes known as…

  1. Standard Employee Retirement Plan
  2. Company Benefits Retirement Plan

There are benefits when using the 401k saving plan… 

  • It is easy for employees to join if they are eligible or meet the requirements. 
  • It has high contribution limits 
  • Employees can contribute a portion of their salary or paycheck to a long-term investment 
  • The employee benefits from tax advantage in that, they lower their tax increase because their contribution is been funded by pre-tax 
  • The employer benefits from a matching contribution which is known as vesting.

ROTH IRA: The Tax-Free Growth Retirement Plan 

(No tax, tax-free or Roth IRA)

Roth IRA is another part of a 401k saving plan. Here is the definition of what a Roth IRA is about…

Roth IRA is an individual money management for a retirement plan, that is generally not taxed upon distribution or withdrawal, provided that certain conditions are met. 

What this means is that this type of retirement saving plan doesn’t tax to be granted to an individual during contribution. 

And also…, an individual doesn’t need to be granted tax during withdrawal. So this is what makes Roth IRA to be called, ” The Tax Free growth retirement plan”.

There are some benefits when using this plan and which are…

  • Roth IRA does not need an age-based distraction. Meaning, when one reaches the Required Minimum Distribution age, he can decide to leave his retirement savings plan to his heir.
  • It has higher contribution limits
  • During distribution, qualify Roth is not affected by the calculation of taxable social security benefits
  • Directly made a contribution to Roth IRA, one may withdraw tax and penalty-free, only if the condition of age or other qualify conditions are met

TRADITIONAL IRA ACCOUNT; The Taxable Income Plan

tax withdrawal and contribution

Traditional IRAs and Roth IRAs are both part of the 401k saving plan.

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Traditional IRA is an individual retirement saving plan in which, an individual who contributes to this plan, may be deducted from taxable income, and withdrawals are also added to the taxable income.

Unlike the Roth IRA which is tax-free upon contribution and withdrawal only if the conditions are met, the traditional IRA is not like that.

Traditional IRA Account has a few benefits that you should know about and which are…

  • As an individual, the only benefit you get is the income protection tax
  • An individual can not use his wealth or property as collateral when borrowing. Means, they protect wealth from creditors
  • Traditional IRA plans give you the option to convert to Roth IRA, but it’s not the same with Roth IRA
  • This type of plan (Traditional IRA) is available to anyone

WORKPLACE PENSION PLAN; Occupation Or Company Pension Plan 

Workplace Pension Plan is another retirement saving plan in which the money you save for your retirement is arranged by your employer. 

What that means is that…, your contributions are directly taken from your wages to be paid into your pension. 

There are some benefits of a workplace pension plan, which are…

  • The money you get from your retirement is usually based on the number of years you’ve been in the scheme or company and your salary
  • There will be tax relief on your contribution
  • There is tax-free up to a certain limit on the sum of money you can take at your retirement

How To Carefully Manage Your Retirement Savings And Investment

There are ways you can carefully manage your retirement savings and investment. But we are discussing assets allocation strategy.

Asset Allocation Strategy

Asset Allocation Strategy is a strategy used to balance the risk involved in investment return. 

If you are trying to manage your retirement savings and investment, asset allocation strategies can help. There are a few asset allocation strategies you can use which are…

  1. Dynamic asset allocation 
  2. Strategic asset allocation
  3. Tactical asset allocation 

Dynamic Asset Allocation Strategy

Based on market conditions,  you can adjust your asset allocation mix as the market trends rise and fall. What that means is that, as the market rises, the equity allocation fund also increases. Also, as the market falls, the equity allocation fund reduces.

So this makes a dynamic asset allocation strategy a common and popular one because you can sell your asset when the market trends show its weakness and also purchase assets when the market trends show its strength. 

Strategic Asset Allocation

Strategic Asset Allocation it’s the type that has to do with buy and hold strategy in stocks and bonds. In other words, it’s known as the static asset allocation strategy.

Due to the movie of different assets, asset rebalance is required to maintain the mandate asset mix because the asset mix will deviate from the mandate asset mix.

For that to work, you need to sell stock and buy more bonds. That way, the actual asset will rebalance to maintain or equal the mandated asset.

Tactical Asset Allocation

This type of strategy seems to be or maybe too rigid. Because it’s all about market timing. 

In this strategy, you may find yourself occasionally engaging in short-term tactical strategy. Because, as time moves on, you may get extra returns as the market condition creates opportunity due to its changes.

With that, you can occasionally change from a long-term to a short-term strategy in order to take advantage of the market opportunity. 

So, by learning about asset allocation strategy, you will be able to manage your retirement savings and investment carefully.

For more information about other asset allocation strategies, you can check 6 asset allocation strategies that work

Are There Risks Involved With Retirement Planning?

There are risks involved with retirement planning which you will consider. Some of those risks are…

  1. Inflation Risk Factor
  2. Market Volatility Dangers

Inflation Risk Factor 

Ask yourself this question, What is inflation risk in retirement planning? 

The outcome of inflation risk is the loss of income, investment, or loss of purchasing due to the unexpected rise in cost.

One thing you should know is that…, inflation is part of a financial risk that one can’t completely avoid. But one can only manage it.

Inflation risk can affect retirement savings plans making it difficult for retirees. By learning and understanding how inflation risk can affect your retirement plan, you will be able to manage and protect your assets.

For more information about how inflation risk can affect your retirement planning, you can check How can inflation risk impact your finances in retirement?

Market Volatility Dangers

Market Volatility Dangers are another retirement planning risk factor. 

Do you know why? Why it’s because, during your years of retirement, the market can become unpredictable or fluctuate. What that means is…, there might be a degree of uncertainty about the future price of a commodity share.

So that means that the assets you set aside might experience a drop-down in value. But what if you aren’t prepared for market volatility danger, what will you do?

If you read the article, MARKET VOLATILITY IN RETIREMENT: What If You Haven’t Prepared shows that, you can use the following steps below…

  1. Know how much you can spend
  2. Look for ways to reduce your spending
  3. Look for other cash solutions 
  4. If you must tap your savings, be strategic 

If you are less busy, you can read this article that discusses protecting retirement money from market volatility

There are other risk factors involved with retirement planning which I haven’t mentioned here. That you can read it from understanding retirement risk factors which are…

  • Longevity risk factor
  • Inflation risk factor
  • Market volatility risk factor
  • Withdrawal strategy risk factor

Conclusion

This is how you come to the conclusion of this article RETIREMENT PLANNING: A Guide To Secure Your Financial Future.

Have in mind that making money management for retirement or having a retirement saving plan can help you a lot. But when all this is not ready, retirement planning can affect your family, personal happiness, and finance.

So from what you learn, you can use it to manage and protect your retirement saving plan.

So, it’s better not to wait, but instead, you should start now to plan how to secure your financial future.

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