A comfortable, well-funded retirement is the product of several factors. Here are six factors behind successful retirement planning that are key as you look to optimize your retirement investments and minimize future uncertainty.
While it's never too early to plan and save for retirement, realistically, the income for doing so won't become available to most people until they're working full time. Once that happens, retirement planners say don't delay.
"Start saving as much as you can, as soon as you can," the American Institute of CPAs said
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Financial planners advise people to set aside as much as possible for retirement, and stick with those contributions through thick and thin, but leave enough income for other needs and priorities. Housing and saving for college for your kids are also going have legitimate, long-term claims on your income. Emergency needs might arise. But don't lose sight of the ultimate goal.
Financial planner and writer Jason Hull recommends
a program developed at UCLA, called SMarT, that commits a percentage of future raises to retirement saving. For the self-employed, he recommends a similar arrangement using a bank account's auto-pay and transfer features.
Do as much research as you can stand on retirement plan options — they are legion. Here's one piece of encouraging news: Forbes reported in 2014
that the financial research firm Hearts & Wallets has found that the quality of professional retirement advice is improving, and that 401(k) plans are themselves making big strides in providing useful, comparative information to account holders.
Experts often recommend a balanced, diversified retirement portfolio mixing stocks, bonds and other financial instruments that can serve as hedges. The synonym for balance in financial circles is asset allocation. As Money-Zine reports, asset allocation
is the mechanism by which retirement portfolios are adjusted and weighted over time between stocks, bonds and cash based on a person's financial goals, appetite for risk, proximity to retirement, and how long (or not) the person has been saving toward that date.
"Guarding your 401(k) and other retirement money requires attention to details on your account statements and in the wider economy," writes Philadelphia Inquirer financial columnist Reid Kanaley
, who urges future retirees to read their income statements closely because errors, fraud and a changing economic landscape can all pose threats.
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6. Cost Consciousness
Administrators of IRAs, 401(k)s and the like charge fees to manage their funds, and just about any retirement account is going to accumulate transaction fees as the mix of stocks, bonds and other investments is changed over time to optimize gains and minimze losses.
How much? It's difficult to tell. The aforementioned Hearts & Wallets study cited by Forbes also found "little consistent information on price." But Hearts & Wallets also found more firms committing themselves to transparency in pricing, so there is some leverage to comparison shop and calculate the impact of fees on the lump sum awaiting you when you finally retire.
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