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The Importance of Pre-Retirement Planning

By: Raymond Cheung

That we human beings are mere mortals means that none of us are ever going to remain young forever. During our youth, we can take up many responsibilities, can do almost anything. We can subject ourselves to lots of labor. But, after a certain age, we will need to retire from our work. Age will take away our efficiency and it will not be possible anymore to subject ourselves to that same amount of labor.

It is for this reason that pre-retirement planning is an utmost necessity for any person. Many people in this world do not think about planning of this sort . But, in order to live a healthy life afterwards, everybody should plan well ahead of their retirement.

Pre-retirement planning is becoming popular nowadays that various companies already offer the plan to their employees. One retirement plan that is becoming popular is the 401k. Under the 401k scheme both the company and the employee will contribute to the retirement fund of the employee. All the employee has to do is to allow his employer to deduct money from his earnings and save it up for his retirement plan. The retirement fund of the employee piles up until it is ready to sustain him once he is ready to retire from work. By allowing his employer to deduct money from his salary, he has unknowingly saved up for his old age.

A person who opts for this type of retirement plan would be able to source out his living expenses from the plan when retirement comes. You can even get retirement planning information from the various brokerage sites. You should also check out the retirement planner of Fidelity Investment since it can be beneficial for you. The said planner makes use of a five-step guideline to help you save for your future.

There are different kinds of tools for planning for the retired life, which gives an idea about how much to save per month based on the current salary. If a person does not have any savings, he has to build up an emergency fund in a taxable account. When he has at least 3 months of living expenses, he can fund his tax-sheltered account to the maximum, and then he can save it into a taxable account. It must be said in this respect that 401k and Roth IRA are tax-sheltered accounts.

Pre-retirement planning should not be limited to one avenue alone because there are lots of investment choices when it comes to pre-retirement planning. What is good about these investment vehicles is they offer additional returns of your investment. However, be prepared to face the risks of investing your money in any plan. It is important that you are very cautious when choosing which investment opportunity to take to make sure you minimize the risks. It is also ideal to spread your investments in different venues like cash, bonds and stocks so that you also spread your risk.

A person should invest in the S&P 500 or to any broader markets. The bonds should be invested in 10-20 year bonds, and the cash should be invested in a money market. He can also invest his money in the international insurance companies, or any international mutual funds. He can get a good return from these investments.

Pre-retirement planning is essential no matter what age group you belong to for as long as you are already earning an income. You must always think of investing and becoming self sufficient later on one you retire and no longer have monthly income from work.

Article Source: Main Articles

Raymond Cheung is a participating writer for Retirement Planning Software and specializes on subjects concerning pre-retirement planning.

This article may be reproduced wholly or in part without written permission provided the byline, resource area, and any hyperlinks remain in order to give proper credit to the author.

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