If you have nothing in your retirement savings account, you’re not alone. According to Bloomberg, you’re in the same boat as 41% of American adults who have saved nothing for their retirement years.
But it’s never too late to start planning, so here are some tips:
Understanding the time horizon
Retirement strategies are very personalized and vary from one individual to another.
Your retirement strategy depends on the difference between your current age and the expected retirement age. The lower the difference, the lower is your ability to take risks. If you’ve got a lot of years remaining till you hit the retirement age, your portfolio can withstand greater risk.
It’s suggested that individuals who have 30 years remaining until they retire should invest in risky assets, such as stocks. Although stocks are highly volatile and derive their value from a speculative market, they generally tend to outperform bonds and other securities over longer timeframes.
On the other hand, if you’re older, your primary investment objective should be the preservation of capital. In this case, securities such as bonds won’t necessarily give you high returns but will ensure a consistent stream of income to keep your expenses going.
Determine your needs
As you move into the retirement phase of life, your spending patterns also take a major shift. You need to decide how much you’ll spend when you get retired to start saving now. Most importantly, be realistic with your spending expectations. If you think you’d only be spending 70% of what you spend now, you might need to reconsider that.
As we age, our healthcare costs increase, and you might have an unpaid mortgage on your liability list too. Let’s just not forget that the cost of living in the US is pretty much increasing every year.
Other than that, if you don’t have a 9 to 5 job, you’re expected to spend more time shopping, traveling, and sight-seeing. This will also add to your retirement expenses. An accurate idea of your post-retirement financial needs will help you save and invest accordingly.
Consider estate planning earlier on.
Any retirement planning process is incomplete without an estate plan. You also need to think of how your family will deal with the financial hardships that may follow after your death.
Speak with an international independent financial planning advisor to see how you can avoid an expensive probate process. If you’re leaving your estate for a charity, do take the tax implications into account. Your goal should be to meet your post-retirement inflation-adjusted expenses while preserving the portfolio value. This portfolio passes on to your beneficiaries after your death.
SJG Financial Services is your best bet when it comes to efficient retirement planning. The team of consultants and financial advisors will guide you on managing your estate and wealth in a way that supports your post-retirement lifestyle. Get in touch if you’re based in Santiago.