In saving for retirement you need planning strategies and options for your unique circumstances, and life stage.
Financial security in retirement requires - retirement financial planning, commitment and money!
The tasks and challenges, issues and concerns about family, career, community, and yes - Money - change as we go through the different stages of life. In this story I acknowledge the other stuff that's going on as we move through the decades.
In Your Twenties-the spending years
You’ve graduated and
left home, you’ve got a real job and money in your wallet. You're happy with
your provisional career choice. And you've got a partner, who seems to be
You still have a student loan, that gap year was expensive, but worth it! And you've maxed the credit card. You're a spender, not a saver!
When I met Peter for Life Coaching - and the conversation turned to retirement:
"I've time enough to worry about
pensions. You're asking me to think about my standard of living in 40 years
time! Right now I couldn't tell you how I'll be fixed next week!"
"I have more urgent priorities! I'll start when I'm thirty."
I urged him to begin learning about saving for retirement.
"Take a look the
financial pages - after you've read the sports pages, the travel section and
the gig guide"!
I urged him to begin saving now. Join his employer pension scheme, or invest in a personal retirement savings account (PRSA). Set provisional goals for retirement and get financial advice on an appropriate percentage of salary to save.
You've put down roots. You have a home and a
mortgage and children. Now you appreciate the challenge of managing family,
career and friends.
Should you begin saving for the children's college fees? Yes, but after you’ve made an increased commitment to your pension savings.
By now you have a good understanding of pensions and investment. You know the rules and benefits of your company pension scheme, or PRSA, and you do a periodic review with your financial advisor or pension's consultant.
You understand that diversification by asset types - Bonds, Equities, Property and Cash reduces risk and because you have a long term time horizon you are not panicked by short term volatility of returns.
Oh my god you're middle-aged! Where have the
last ten years gone!
It's time to make some final career choices. Do you work harder to "make it" or look at other career options? Are you still learning, contributing and deriving satisfaction from your job?
And what's this thing about "Personal Development"? Maybe you need to explore other interests, develop that hidden talent ... writing, singing, and teaching? A second major interest could cushion against life's vicissitudes, and suggest options for retirement hobbies and retirement jobs.
You are now an experienced investor. You are monitoring your retirement fund and making periodic adjustments to the asset allocation, in consultation with your financial advisor. You do this quarterly. Volatility of returns is becoming more of a concern, but you still have time, you are reconsidering your risk tolerance.
You are enjoying some of life's luxuries! You've got the flash car and other trappings of success.
Enjoy, you deserve it ... but only after you have set aside an increased contribution to your retirement savings.
One of the concerns of
people in their fifties is that of "running out
Hopefully, by now you have a plan for your retirement lifestyle and you know how much money you need to retire. Two thirds of final salary seems to be the standard for good pension schemes.
Now more than ever you need to appreciate the relationship between risk and reward and to understand your risk tolerance. Do not underestimate the stress of a high risk portfolio.
In my own country, Ireland, Global Equity market turmoil has wiped out the gains of the "Celtic Tiger" years and has failed to beat inflation for the past ten years.
Mercer Investment Consultants report that the 10 year average return from Group pension managed funds to February 2009 was a negative -1.1%.
"2009 is turning out to be an extremely challenging year. Economic data continues to surprise on the downside while earnings continue to disappoint. Valuations have clearly improved significantly but the markets will require a change of sentiment for any sustained improvement to take hold. "
(Mercer Investment Consultants)
Your investment needs and risk tolerance changes over time. In the early years you may want exposure to funds with the potential for significant long-term growth. As you near retirement, protecting your existing fund value with lower risk investments is likely to become a priority.
As you get closer to retirement you need to switch gradually into safer assets such as bonds and gilts, and by the time you are within a few years of retirement experts recommend that most people should be entirely in gilts and cash.
If you have neglected saving for retirement up to now, your options become limited and you have to be realistic. Retirement at 65 may not be possible and you may have to become creative - considering retirement jobs, retirement in your seventies. You'll find lots of ideas and stories on this site!