The most common retirement mistake we see people making is that they put off planning or they just do nothing. Perhaps they have a lot of other urgent priorities in their lives, or maybe they’re frustrated by the complexity of devising a strategy. Procrastination is the enemy of the retirement you deserve. Here are three reasons why beginning your retirement planning early sets you up for a longer, more comfortable retirement.
They payoff for any investment is the return you get on principle. Put quite simply, the earlier you implement your retirement strategy, the more accumulation you can achieve. The returns you achieve in your investments can be, in many cases, exponential over time. Implementing your plan earlier can result in more regular income, an earlier retirement or both.
Putting off the retirement planning process can drastically limit your options for investment. Every option for creating retirement income has different characteristics and varying potential. But some require more time to produce the desired result which may mean that retirees who are late to the “planning party” will have fewer courses of action they can take and, potentially, fewer income streams down the road. Additionally, the more tools you have in your retirement planning tool kit, the better you can diversify your portfolio. And, that diversification can provide you with extra protection for your investments.
Risk and Return
As we said in the first blog in this series, The Rule of 100, the level of risk you should incorporate into your portfolio is inversely proportional to your age. In other words, the older you get, the less exposure you should have. This means that it’s safer for you to pursue the higher-risk, higher-return investments when you’re younger because you have more time to recover financially if you incur a loss. The ability to pursue high-return investments goes back to the first point about growth. You will have greater opportunity for accumulation before you need to begin purging risk from your portfolio.
Everyone wants to ensure they can enjoy their retirement years. To gain that peace of mind, you need to know that you have ample income to cover your regular expenses and your personal enjoyment, along with the additional income to provide some cushion for unplanned financial emergencies. When it comes to your finances, you will reap what you sow. And if you don’t sow the seeds of retirement income early, you’ll have far less fruit when the harvest comes. So, what are you waiting for? Get started today!
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to guarantees or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.
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