Retirement Planning - Start Early & Save Regularly

Increased life expectancy and the move away from a traditional company "defined benefits plan" make retirement planning amongst the most important and long lasting decisions for individuals and families.

As a rule of thumb, financial planners recommend withdrawing no more than 4% - 5% of retirement savings every year. That means a lot of savings for an average family (to get a income of $3,500 in retirement would mean savings of just over 1 million).

How does one save enough over 30 years of working life for 30 years in retirement? The answer is simple - the magic of Compound Interest. Importantly, savings is different from investing (and speculation from Investing). A few percentage points in interest rates can mean a huge difference in your future wealth. Along with safety, one needs to ensure a good return on investments - even after retirement.

If you saved $ 100 per month for 40 years: At 3% interest you would have approx. $ 92,000 (2x savings), at 5% - $ 152,000 (3x savings), and @ 9% - over 465,000 (10x your savings)

Simulations show that -- starting early, saving regularly and getting a steady rate of return -- will mean your required retirement nest will consist approximately 30% of your savings and 70% from cumulative interest.

Basic guidelines include:

1. Pay yourself 1st: Set up a regular monthly plan. This ensures discipline as well as allows benefits of dollar cost averaging.


2. Asset allocation: Over a longer period asset allocation has shown to be the most important factor in determining returns from investing (with stock selection and market timing, having only secondary roles).


3. Keep it Simple: Index funds have the advantages of - (i.) diversification, and (ii.) lower costs.


4. Have adequare Life Insurance - based on your (and childrens) age.


5. Have an updated Will


6. Ensure your critical financial documents are updated and uncluttered/easy to access.


7. Money is only a means to an end. Stay Happy & Healthy.