Retirement Planning: Conclusion

While it's impossible to learn everything you'll ever need to know about retirement planning in a single tutorial, the ground we've covered here should give you a solid start.

Retirement planning is an ongoing, lifelong process that takes decades of commitment in order to receive the final payoff. The idea of accumulating hundreds of thousands of dollars in a retirement nest egg certainly can seem intimidating. But as this tutorial demonstrates, a few basic calculations and commitment to a feasible plan make it definitely achieveable.

Let's review what we've covered:

As a result of an increasingly aging population, governments may be forced to reduce or even suspend Social Security benefits in the future.
The responsibility for financing retirement is being transferred to individuals.
How much money you'll need to save for retirement will depend on your desired standard of living, your expenses and your target retirement age.
To determine the size of nest egg, you'll need to: 1) Decide the age at which you want to retire. 2) Decide the annual income you'll need for your retirement years. 3) Add up the current market value of all your savings and investments. 4) Determine a realistic real rate of return for your investments. 5) Obtain an estimate of the value of your company pension plan. 6) Estimate the value of your Social Security benefits.
Assume that an annual inflation rate of 4% will erode the value of your investments and adjust your savings plan accordingly to provide yourself with a margin of safety.
Income during retirement may come from the following sources: 1) employment income, 2) Social Security, 3) employer-sponsored retirement plans, 4) savings and investments, 5) other sources of funds, including inheritance money, prizes and lottery winnings, gifts, raises, bonuses and real estate.
There are several investment options that can be used to achieve your retirement savings goals. These include, but are not limited to, government-sponsored vehicles (IRAs, 401(k)s, RRSPs etc.), company pension plans, and other products such as annuities and life insurance.
Beginning to save for retirement at an early age is one of the biggest factors in ensuring success.
The power of compounding also works with taxes – using tax-deferred investment vehicles can help you to maximize your rate of savings.
Asset allocation is a key factor in building any successful portfolio. The assets you choose will depend on your risk tolerance and investment time horizon.
Diversification will help you to reduce the amount of risk in your portfolio, increasing the chances that you'll reach your retirement savings goals.
Make saving a priority by setting up automatic payments from your checking account to your retirement savings account, making the maximum salary deferral contribution to your employer-sponsored retirement plan and working aggressively to pay down large debts that can reduce your saving rate.
Make a household budget to ensure that you are contributing as much as possible to saving for retirement and aim to reduce unnecessary expenses.

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