4 essential steps towards your retirement plan [Quick Guide]
retirement-plan

4 essential steps towards your retirement plan [Quick Guide]

The retirement plan is a basic step in everyone’s life planning process. It is a responsible and longterm strategy to keep your savings. Because only if you have a steady look upon your financial situation you will be able to enjoy your retirement. We give you some hints how you can plan your retirement and what’s essentially important for your personal goal to live a great retirement.

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1 Create a timely retirement plan that sticks to a clear frame

If you want your retirement plan to work out it is essential to know how much time you have. Consider yourself aged 50. You will have 15 years for your investment. Maybe you will have to use different strategy in the first 5 years and then switch in order to reduce risks. Of course, no one wants to lose money just before retirement.

2 Define your financial budget goal

If you want to reach your retirment goal you have to define your goal and the amount of money you want to save during your working life. It is also essential to be clear how much money you will be able to save. Therefore it is important to keep yhow much money you will also need to live a good life before you enter your retirement.

In order to stick to your retirement plan you will have to be willing to reduce your living standard otherwise you will erode your savings.

3 Evaluate your own risk tolerance and your investment goals

You do not neccessarily have to invest in stocks. Sometimes bonds might be enough. Especially when there is not enough time left you can reduce your risks. Bonds will realize a fair interest rate without higher risks.

Start to take at the risks before you invest and do not shift your strategy to often. Also be aware of the fact that it can be really stressful to invest lots of money in stocks.

4 Find your perfect balance – do not underestimate the risk of stocks

A retirement plan includes both a certain saving rate and a certain amount of money that you need to carry your monthly and yearly costs. Too much savings will reduce your living standard. A higher living standard will reduce your savings. If you want to create a Win-Win-Situation you will have to lead a balanced live.

The role of stocks can be really important to gain a certain wealth. But this strategy is only useful if you have enough time to invest. Folks in the late 50s will have to be clear about the fact that sometimes stocks are really volatile.

The investment might crash for a few months and the recoverage might take years. If you want your savings to be save you might also focus on moderate investments like housing, bonds, savings accounts.

Acknowlegement: The very important role of inflation

Retirement plan
Retirement plan

Inflation is an important factor when you think about your investment. You can approximate that you will lose more than 40% of your savings in 25 years if you set up a yearly inflation rate of 2%. It does not sound too much but 100.000$ Dollar in 1995 would be worth only round about 60.0000$. This is quiet brutal reality but that is what you have to know if you want to take care of your living standard.

So you have to realise a yearly growth rate of at least 3% in order to save your money. It is clear that you will have to identify good investment to save your money over a longer period of time.

The perfect retirement plan: Conclusion – What you should keep in mind

Finally it is important to keep some basics in mind. What do you want to take away? What have you learned? The most important message you should take away is, that you have to aproximate your time limits. If you manage to calculate time and risk factors you will be sure to keep your investments.

Another important step is to approximate the amount of money you want to spend during your retirement. The clearer your future goals are, the better your chances are to keep your wealth in the future.

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