Debt-free Retirement

 

As a young person, the idea of retirement is nothing more than a vague notion and the prevailing sentiment is that it's hard enough today to survive financially without worrying about a time many years down the road. Most of us procrastinate and ignore planning for retirement and it is not until an individual reaches his mid-sixties that discover that he has high debt and little in the way of savings. The consequences are not good, either continue to increase the levels of debt in order to fund a retirement or delay retirement and continue to work. Neither of these alternatives is acceptable, so the solution is to avoid placing yourself in that situation. Begin preparations now while you still have time.

Here are some tips and factors to consider while planning for your retirement. Determine what age you would like to retire as this will affect how much you will need to begin saving on a monthly basis. It is difficult, but try and estimate your life expectancy by consulting recent information on how many years your money may need to last. This will be another factor in determining how much you will need in savings.

Do not forget to factor in the effects of inflation. It is important to figure out roughly how much money you will need in order to live during your retirement years. Once this is done you can determine the amount of years you have to save. With this information you can calculate how much you will need to save on a monthly basis. Remember to consider that inflation must be included in the final calculations because a dollar in the future will not be worth as much as today.

Monitor your risk tolerance because many experts recommend investments with more risk when retirement is still many years away. The theory is that these riskier investments offer potentially higher rewards. If the investment takes a sharp dip there is still plenty of time for you to recoup the loss. However, as retirement nears transfer money into more conservative funds. If your investment takes a sharp drop at this point you may not have time left before your retirement to recoup the money. Be sure to create a budget, cut back on unnecessary spending, save on a consistent basis, and pay off credit cards on a monthly basis.

Although people may never be quite as prepared for retirement, you will never regret beginning your retirement preparations well in advance. In fact, the earlier the better. This almost always will place you in a stronger financial position when your retirement rolls around.

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