Desired Goals Of Retirement Investments - An Understanding
An investment strategy which is goal-based is increasingly becoming important for a retired person
. In earlier days, investment after retirement was done for safety and financial security. Now with changing priorities, increased life expectancy and the present economic conditions, it has made investing planning a very important task for people preparing for retirement.
It's no longer adequate for persons who retire to just liquidate assets on retiring. They are expected to monitor and manage their investments wisely. It is not at all possible to have good investment plan without any sound goal. These goals are:
I) Protecting our retirement funds.
ii) Minimization of risk.
iii) Tax minimization
iv) Provisions of funding occasional expenses
Protection of retirement funds
As retirees are immensely dependent on the money from their retirement funds so they are more concerned about the protection and safety of their funds when they invest. In the initial years of retirement, this concern for safety of funds should be much greater. This is because the impact of any loss is higher in the initial stages. As the retirement fund increases, the retirees can turn focus on a bigger portion of the fund for generating more income and growth.
Risk minimization
As inflation normally erodes the realistic value of your investments, it is very important to work towards maintaining an average return flow which should in any case exceed inflation. As life expectancy has increased rapidly, so has longer retirement period can in fact compound the risks associated with retirement as well. One should also keep health related risk in mind while investing. Though going for the purchase of any long term care is not exactly an investment, going that way would afford you a good health insurance in your retirement days.
Tax minimization
Continuing to pay a tax on your retirement income which is fixed can turn out to be anathema for a retiree. Inflation as well as taxation tends to wipe off any benefits incurred from good investments by retirees. However, retired people can opt for strategies to lessen taxes by using immediate annuities, and using tax deductions to their advantage.
Funding retirement activities and periodic expenses
When you are generally investing, you may want to diversify your portfolio as per the classes of assets. You should also diversify your portfolio as per your intended goals and personal needs. Many of the needs of retirees are not always on a daily basis or not even annual. They are on a need basis. Investment should be done in such a way that a retiree becomes capable to meet his immediate or any future needs. It is therefore most important for you to prioritize your aims and then be totally realistic about them.
by: Michael C. Miller
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