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retirement more diligently. This is one reason why retirement plan- ning is so closely tied to personal financial planning. The process would be incomplete, at best, without some form of retirement plan- ning. Because retirement planning impacts both your future and cur- rent lives, it is the most influential part of financial planning.

With the stock market downturn of 2000–2002 and the economic recession, people are experiencing the first real market decline since the 1973–1974 bear market. We’ve seen massive sell-offs of stock and mutual funds by individual investors who have gotten scared and pulled all their money out of the market.Yes, it’s scary to lose money, especially when it’s your retirement fund, but is that the smart thing to do? Would you be better off keeping your retirement funds invested in stocks and bonds, or in money market instruments? And, what is a suitable way to hold your retirement money? Throughout this chapter, we look at the various retirement accounts and discuss the pros and cons of each. We also talk about ways to enhance your portfolio value once you have retired and are taking distributions from your accounts as income so that you don’t outlive your money. Just as an increase in life expectancy has an impact on the social security system, it will also have an impact on your retirement funds.

So now the question becomes, where do you want to start? We’ve outlined savings, how to save, and different types of investment vehi- cles in which to invest your money. In my opinion, having an emer- gency fund is far more important than building up your nest egg for retirement. That way, if you have extra money to use for an emer- gency, you won’t have to tap into your retirement accounts. However, once you have built up a sufficient cash reserve (or if you already have one), you should turn your attention to your retirement plans.

Look back at the list of goals you made. Did you list specific things that you wanted to do or have once you were retired? If you didn’t, please consider what your retirement goals are. Once you have identified what you want to do when you are retired, we can start making realistic predictions about how much you need to save. For instance, if you want to do a lot of overseas traveling, it’s important to plan for that now, so you can have that extra money included in your retirement accounts. If you don’t plan for those contingencies now, it may be harder to pull them off once you have

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