Reasons why you should not depend on your company retirement fund as the only pension scheme are:
- Risk of major illness and disability, you may need more funds if this happen.
- Risk of longevity, that you might live over your prediction.
- Risk that the inflation will erode your savings/pension plan in a higher inflation rate than your predicted rate.
Of course, you may still have to deal with the decreasing market price of your assets that might deplete your net worth.
The Retirement Plan you need should be a personal financial portfolio that can give you passive income you needed to let you live in a comfortable retirement.
You can calculate what you need to achieve in your retirement funds by deciding your long term needs, inflation rate and other factors that may interfere with your life, such as a possibility to create a trust fund for your kids.
For making a portfolio of your retirement plan investments, it is highly recommended to seek professional's advice. There is no uniform financial plan that can solve everybody’s pension scheme.
By hiring a professional you will know exactly how much of your income should be put into your portfolio to get the needed passive income in your retirement days, and what kind of tax benefit you will have.
Here are several factors to be considered in creating your retirement plan:
- Calculate realistically what your needs are in the future, you should consider the worst inflation rate against the worst scenario that may happen.
- Put enough cash reserve in your bank account for your emergency needs. Do not consider this particular cash as part of your retirement fund. This cash reserve can be 6 to 12 times as much as your monthly cost of living.
- Browse for a competitive return of investments. Look around for mutual funds, obligations, and other financial products. You can even consider on making a direct investment in a business that will give you a considerable passive income. You may also consider investing in property that can give you capital gain (when housing market rise significantly, you can sell your property and get a capital gain) as well as rental income.
- Ask your financial advisor for tax benefits that you may have from your savings and investments.
- Take an insurance to cover for your family. It should be part of your retirement plan. Insurance that might be needed such as: Whole life or Term Life insurance, disability insurance, home insurance, or others depending on your situation.
- Review to make sure you have a healthy and balance investment portfolio. Sometimes you have to make changes on your investment policy to get better returns and keep up to date with inflation rate.
When you ask, when will be the best time to start your own Retirement Plan? It should be NOW, as soon as possible. The younger you start planning the better. It is your extra advantage if you are still at young age (please read about How strong Compound Interest is on article Savings as Your Income Management Tools on Archive May,25th, 2007, it will give you inspiration on financial matters).
