Does your retirement seem years and years away? While it may appear this way, you owe it to yourself to look ahead and begin giving thought to a time in your life that may account for 20 or more "golden" years. Granted, time may be on your side. However, if you quiz some of your older peers, they will probably tell you that saving for retirement is not as simple as it may initially appear. The fact is, there are many factors that will ultimately determine the type of retirement you will experience.
Inflation. You’re probably aware that inflation can deteriorate your savings over the course of time. But, how seriously do you take inflation? Did you know that at 3 percent inflation, $100 today would only be worth $34.44 in thirty-five years? Therefore, the key is to seek retirement savings avenues that work towards outpacing the long-term effects of inflation.
Taxation. One of the few constants in developing a retirement savings plan is the impact of taxes. Your present income level, tax bracket, and the types of tax-advantaged retirement vehicles available to you can all play an integral part in how your plan develops. It’s important to manage pre-tax contributions to employer-sponsored plans or an IRA (Individual Retirement Account) in order to take advantage of the tax-deferred nature inherent to such plans.
Diversification. For many individuals, deciding how to invest pension and profit-sharing plan assets can be an unsettling experience. Many people do not consider investing everything in a single security an appropriate strategy, even if it is a “blue chip.” Thus, it’s important to consider mitigating your risk with a variety of investment options and creating an investment mix that is consistent with your overall objectives. This holds true for investments within your retirement plan, as well as those outside.
Discipline. One of the key ingredients of retirement plan confidence is the need for a disciplined approach to saving. By making regular contributions to your employer-sponsored plan or IRA, you can address the power of compounding interest (the ability to receive additional interest on interest already earned). With a steady flow of contributions, your retirement assets can help you pursue your long-term goals.
Personal Savings. With factors such as inflation, taxation, and overall investment performance to contend with, there is a distinct possibility that retirement plan assets may eventually fall short of sustaining future income levels. It may be necessary to supplement traditional retirement plan income with personal savings and investments in order to meet your long-term retirement income goals. Therefore, you should consider saving and investing, in addition to making retirement plan contributions in order to help prepare for a potential shortfall.
The earlier you recognize the variables that will shape your retirement planning, the greater the likelihood that you will have the appropriate strategy in place to pursue your long-term objectives. However, an understanding of these principles alone, will not guarantee future success. By taking an active role in the years ahead, you will help your chances of working towards a fulfilling retirement.
Have specific questions? Don't hesitate to reach out to me today
Wes Garner, CRPC
Principal Wealth Strategist
(281) 269-8669
wgarner@tdecu.org
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
This article was prepared by Liberty Publishing, Inc.
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