The passing of time has an impact on the manner of retirement planning. There is also a direct way in which this will impact the financial aspect of the planning process. As a person moves up in age, responsibilities multiply. There are various tasks that need to be done and along with that, there is also the benefit of the stability that one witnesses in various aspects of life.
Some people enter the phase of financial prosperity at this age. It is very important to use this opportunity well and make the best use of the situation. Many people fail to take the necessary advantage of the situation and in the process, they lose a lot of valuable time. This period is crucial and will make a big difference in the way in which the final situation shapes up.
Retirement Planning
This is the period that will form the base for retirement planning. A lot of the efforts that will set a person towards their final goals will be made during the thirties and this will prove to be a major benefit for the individual. One has to ensure that the retirement planning process has started during this time and is not put off till a later date. People feel they can wait for some more time before starting the retirement planning process. This can prove to be counter-productive as very valuable years are lost that will not come back.
Some amounts that are tucked away for specific purposes might not make much of a difference at this stage in life but their value will be tremendous at a later stage when you need them most.
Stability In Career
As one goes into the thirties things start settling down in life. Those who have joined the workforce at an earlier age now have the required experience and are building on their career. On the other hand, those who have gone out for an additional educational degree have also got back into the work-life mode. This is probably a time when the individual does a lot of activities on the work or professional front.
The stability in the career has to be reflected in the earnings side also so that there is some provision for savings. This is one of the best times to save for retirement because all the factors that will support the retirement planning process are present. The individual does not have to do anything extra in order to get on the money list.
Income Starts To Rise
This is one of the most crucial factors that will help an individual in the overall planning process. The rise in income is a goal that everyone has been looking at for a long but earlier there were a lot of obstacles in the path. In the thirties, even these obstacles are slowly being removed and the person moves up the ranks. For those in business, things have now got set and one can focus on measures that will build upon the base that has been created. This will ensure that the benefit is available in the form of larger earnings and better satisfaction.
This larger earning has to be balanced with the other factors that an individual will experience. This deals with the higher expenses that will also be incurred and there has to be a right match within this. Adequate income must be available for a person to use it for the purpose of retirement planning. There is no use in having a large income if this is not going to be used for the intended purpose.
Responsibilities Rise
There is a rise in the expense side too along with the rise in income. This is on account of the corresponding increase in the status – both personal and professional. The rise in the responsibilities will translate into the fact that there are some expenses that will have to be incurred no matter what is the overall situation.
In terms of responsibilities at the workplace, it is more work and supervision that can result in a position where an individual can ensure larger earnings. On the other hand, personal responsibilities would mean that one has to devote more time as well as effort to meet the requirements here. This will have an impact on the retirement planning process because the impact of changes in personal life has to be incorporated in retirement planning at various levels.
The key in this process is to balance the rise in responsibilities and expenses with the rise in income so that on an overall level there is a better situation as far as the ability to undertake retirement planning is possible.
Payments Rise
This is also the time when there are a lot of long-term decisions made by the individual. This will lead to a rise in the fixed payments by individuals. Some common examples include buying a house that will lead to a regular EMI payment coming in or could also be the purchase of a car that will also involve a regular payment to be made by the individual. As one has a family, the expenses on the family will also rise to add to the overall burden on the individual. With children around, there are certain expenses that will not be predictable and hence this also has to be taken into consideration. This kind of changing payment requirements will mean that the individual will have to keep track of these issues very carefully and then make appropriate financial decisions.
Less Free Float
No large amounts are available as a free float that can be used for various purposes that one would like. A free float here refers to that amount that is loosely available as cash and that which can be spent wherever necessary as felt by the individual. The rise in the extent of the fixed expense plus the presence of the unavoidable and uncertain expenses mean that the individual will be saddled with a lesser amount of free cash that they will have to be spent on the other items.
This has a major impact as it is in the way in which the investments have to be undertaken. The less free float also means that the value of money is now realized properly by the individuals and they know that a certain sum will have to be spent caring for it to give the full extent of the benefits that are available on the sums.
Effort To Put Money Away
This is the time period when investments have to be made very carefully. The situation is such that there have to be specific efforts by the individual in various areas related to finance. Each area has to be tackled very carefully. The first part relates to the actual plan being formalized. This plan has to be very clear and it has to be complete in detail.
The goals have to be clearly laid out and then they have to be specified along with a description of the way in which they are to be achieved. Then one should set out taking the steps required to achieve the goals. The steps include actually laying out what has to be done in terms of savings and the channelizing of the funds. This has to be laid out in clear terms failing which the success of the planning process is doubtful.
Foundations Of Retirement Plan
At this stage, the foundation of a retirement plan will be strengthened. The retirement planning process requires a lot of information and this has to be arranged in a proper manner for appropriate decisions to be taken. The situation here is ripe for the retirement plan to come into motion and this requires that effective retirement planning be done. The foundation of planning is such that each of the financial steps will have to be undertaken in a systematic manner to achieve the objectives that have been set out for the process. Since the goals are very clear it has to be made absolutely certain that the specific steps in the various directions are to be made in the plan. The process also has to be made very clear so that there is clarity on how the various steps will be undertaken and what follows after the other so that there is no confusion about the manner in which the process will be completed. The retirement planning process can now go completely ahead at full speed.
All Assets To Be Identified
In this middle age, the needs of the individual are so varied that there is no asset class that can be ignored by a person. There has to be a clear way in which the various assets would have to be considered and their proportions are chosen so that a proper mix can be chosen for investment among them.
At this stage in the retirement route, there is still quite some way to go for the individual as far as the number and nature of activities are concerned. In many cases, the details available are also not very clear, and there is confusion about the way in which particular activity has to be conducted. In such a situation one has to be alert and then select a list of those assets that will yield the necessary results as well as ensure that the final goals are achieved.
How To Go About The Process?
At this stage of the retirement planning process, there is still a long way to go for the individual. This will still mean concentration on assets that have growth potential as there is a chance for good growth because of the large number of years available to the investor for the purpose of making the investment.
In terms of actual investments, there has to be a significant part of the portfolio that has to be in the area of equities, as this will ensure that there is adequate growth coming into the portfolio. A small part of the portfolio will be going towards debt, as this would be the stabilizing factor in the entire investment.
For many people, it is very likely that a significant part of the portfolio is still in debt and this proportion will have to be changed. This kind of portfolio will be able to provide for the gains that can be expected in case there is a strong return as far as the equities are concerned.
