Financial planning

Financial planning

Planning for retirement

Retirement refers to the stage of life where an individual leaves their jobs due to advancement in age. Past research has shown that most people don’t prepare in advance for retirement hence they end up spending their post employment lives in poverty and frustrations. The first step towards preparing for retirement is to begin saving early. Savings can be undertaken through employer’s retirement savings plan. The savings should never be touched unless they are to be used in initiating business ventures that are likely to boost income. Before retirement, one needs to pay off all their debts so that they do not spend most of their benefits on paying off debts.

The retirement income can be grown through diversification of investment and proper management of spending through the use a budget planner. At retirement, one needs to take advantage of all forms of entitlement such as travelling concessions, reduced council and water rates and cheaper medicines (Greenwood, 194).  This will further involve application of government benefits that designed to help the old people in the society. Engaging in beneficial insurance plans can greatly assist in lowering financial burden associated with health conditions. In order to avoid legal as well as administrative burden, one need to update their will during retirement. The final planning for retirement is the preparation of a will. A valid will, can allow the court to appoint an administrator to administer the estate and distribute the entire asset based on the set provisions of the law.

Building a nest egg

A nest egg is defined as a sum of money that is saved for the future.  One of the ways of building a nest egg is to consider annuities as the building block since they provide a payout upon reaching maturity. An individual intending to build a nest egg should to take advantage of compound interests (Richards, 84).  The first amount of money to be saved is the most important since it has the potential of growth over time. Compound interest offers the ability to multiply money with less effort hence saving should be initiated as early as possible so as to attain the desirable outcomes.  Diversification between small and large companies is a major factor towards risk tolerance and portfolio mix.

An individual should resist the temptation of spending before making savings.  Patience should be a guiding factor so as to avoid making large-market timing mistakes that can lead to huge losses. Contributing to a 401(k) plan is another way in building a nest egg. The plan offers all taxpayers with a tax break on deferred income. They tend to be less expensive to the employers in comparison to the traditional pension programs. As a result, some employers are making free contributions to their employees’ plans. A nest egg can be built when people maximize the amounts that they are contributing each year to the 401(k) plan. More money invested in the plan means more investment in bonds, mutual funds and stocks. Reduction of spending provides a means of increasing savings for the future.

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