What are the most important things in retirement? - December 16, 2018
During this time of the year we think about the future more. Pension is one of the most important things when it comes to our future. Planning it as best as we can has a high importance, too. Especially when pension systems have serious problems around the world. We have some tips on what to focus on when planning ahead.
At the end of the year, we think about our future more. No wonder pension often comes to our mind as it’s one of the most important things about our upcoming days. As we always say, planning ahead is especially important in this matter. What are the most important things to keep an eye on? Let’s take a look at them!
How much money do we need?
The first thing we should decide is how much money we need for our retirement. According to an American approximation $610,000 is desirable for US citizens to retire safely. They also mention a rule that investors can take out 4% of their portfolios safely every year, which means that they can have a fund of $24,000 every year. But most people don’t have that much even in the US, and $24 thousand per year is far from luxurious in America.
Of course, the cost of living varies by country, but thinking forward and trying to calculate a safe retirement is important everywhere. As life expectancy grows, it should be a good idea to accumulate a wealth that can help us during a 10-15-year long retirement. This is especially important as pension systems are crumbling around the world. It’s a good rule of thumb that people need at least 50-70% of their annual revenue as a yearly pension to safely retire. Some expenses are usually smaller for elders (they tend to spend less on their children, clothes, accommodation) but some, including health care, are higher.
Plan for health expenses!
Longer life expectancy doesn’t mean elder people have perfect health; on the contrary. As we’re getting older, we can expect our health to falter, therefore we are going to spend more and more on healthcare. This should be calculated into our expenses when it comes to our retirement plans.
Again, expenses vary greatly depending on the country we live in. Health and insurance systems differ just as well. However, US-based Fidelity calculated that an average American retired couple needs $280 thousand to cover their healthcare expenses during their retired lives.
Start as soon as possible
Our best advice comes last: plan ahead as far as possible and start saving as soon as you can. This is especially important as starting sooner can really help with successful investments. As you can see from the chart below, starting an investment in advance with less money is still far better than investing later but with more money. This is a general rule of thumb in investments planned for the long term.
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For most people the best solution is an investment portfolio tailored to one’s needs. This way we can pick how much risk we want to take, and we can define our goals, too. It’s always a great idea to balance our age with the risks we take: the older we are the less risks we should take and vice versa. This is how we can achieve the best returns in a given time. It’s also good to know that the best results can be reached with medium- to long-term commitment with investments.
Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.