Retirement Planning

One of the major components of the personal financial planning process is Retirement Planning. After all, we all want to have enough money so that we can retire comfortably and not all of us will win the lottery. In addition to having enough money to be able to retire, many of us also want to retire early. However, children, vacations, cars, houses and food require current uses of our resources that may otherwise be available for our "golden years". Also, retirement seems so distant that we tend not to focus on saving for retirement. We opt to utilize our available resources now instead of saving and investing for retirement.

In this section, we hope to highlight issues that will help you gain some insight into the retirement planning process.

Be relaxed, it's not that difficult to understand and time consuming.

Let me introduce you some simple but very useful tools to help you plan for your retirement.

1. How much do I need for retirement?
   
   Factors to consider: When to retire, Life style in "golden years", Return rate of money.
   
   E.g. Retire at age 60, Expected longevity to age 84, $2000/mth expenses in today's value of money, assume rate of return is 4% and inflation rate is 3%, means you need to accumulate $500,000 at age 60.
   
   There is a trade off between these factors, use this tool for a clear illustration: http://www.advisortek.com/free_tools/calcs/Money_Last.swf
   
   
   
2. How much do I need to save regularly to achieve that amount?
   
   Factors to consider: Current age, Return rate of money.
   
   E.g. Current age 30, retire at age 60, save money in bank, earn a 1.5% interest rate, you need to set aside $1,110/mth.
   
   There is also trade off between factors, e.g. instead of put money in bank, you can do investment for a average return 6% ~ 8%. In this case, you probably only need to set aside $450/mth to achieve the same goal.
   
   Use this tool for a clear illustration:
   http://www.advisortek.com/free_tools/calcs/Triangle_Wealth.swf
   

For questions regarding investment return and investment options, please refer to another article of me on Investment Planning.