Retirement Planning Term Paper

Excerpt from Term Paper :

retirement planning. Beginning as early as age, about what are their dreams for retirement? What goals are important for living during the retirement years? The individual should write their retirement plan and have it available to update when needed.


People are living longer and having better health than ever before. "We're gained 25 years since 1900. That extra time is added to midlife. We have a second middle age - a period beginning at age 50 to 75" (Kanchier 2002). Often retirement hits before a person is ready? What are the dreams for the future? What is important to one person will be entirely different to another person. That is why determining and designing a strategic retirement plan at an early age is vital to reaching those dreams. The time to do this is "now" and not "later." Begin today.

Introduction/Background: Here Are Some Facts To Consider About the Retirement Game:

By beginning an early retirement plan, a person can create the kind of work and lifestyle you want. You can study, travel, establish a business, restructure or modify a current position, do volunteer work or pursue leisure activities that give you a sense of purpose and feelings of accomplishment, confidence and usefulness" (Kanchier 2002). Most people do not realize there is a second "mid-life" period where they can accomplish dreams during this period of life. There is time to start college or begin a new business. The point is people should begin as early as possible to think about their dreams, whether they accomplish during the second "mid-life" or during their senior years.

Problem Statement:

The problem is that people procrastinate because they lack the knowledge of how to design a retirement plan or feel that they lack the money to put into savings for retirement.

Purpose: The purpose of a retirement plan is to save money in various ways including stocks and bonds for the dreams of retirement. This retirement plan can begin at age twenty or at sixty, but the sooner the plan is written the better chance of having the retirement funds when they are needed.

Literature Review:

Beginning the retirement plan by asking questions:

Begin by asking these questions:

Are there dreams to settle in a specific state or country in retirement? If so, begin to investigate the areas. Perhaps make a few short trips to the area. Begin saving for this with the goal of traveling there when retirement comes.

Are there dreams to open a business? Have a second career? Start taking courses at the local college. Volunteering is a great way to learn about a career field.

Be a person who is willing to dream, to make choices, and be brave.

Perhaps there are dreams to do some of the above, think about these now while there is time to take action to accomplish your dreams:

Women are twice as likely to live in poverty" (Isaacson 2002).

Half of the elderly women living alone have incomes of less than 10,000 per year" (Isaacson 2002).

Only 20% of baby boom women will be financially stable in retirement.

33% of women avoid making investment decisions for fear of making mistakes" (Isaacson 2000).

Good News: Begin the strategic retirement plan now. Do not wait until mid-life or the second mid-life. What is wrong with now? People say that they should save, but they procrastinate until it is too late. "Procrastination is the number one problem" (Isaacson 2002). An early retirement plan should be started in the 20's.

First, Investment Terms

Understanding Investment terms is important before beginning any retirement plan. One site on the web that might be useful is are a few terms and definitions (Rogers 2002):

401 (K): A type of pension plan that allows employees to contribute a portion of their salaries to retirement investments on a tax-deferred basis.

Bear Market: A prolonged period of declining stock prices.

Bull Market: A prolonged period of rising stock prices.

Blue Chip Stock: Stock of large, well-known companies.

CD: Certificate of Deposit: A debt instrument issued by a bank that usually pays interest. The date of the maturity ranges from a few weeks to several years.

DOW: Dow Jones Industrial Average (DJIA) - A popular index to measure and report value changes in representative stock groupings. "The Dow" is a price-weighted average of 30 actively traded blue chip stocks primarily of industrial companies.

Diversification: Spreading risk by putting assets in several categories of investments-stocks, bonds, and money market instruments so that any effects of weakening or failure in one area will not be overly serious to the total investment in the (diverse) portfolio.

Beginning a retirement plan:

At age twenty, do these:

Begin with an employer's retirement program. Most of the time when an employee puts in so much money, the employer will match the funds. "Be sure to contribute enough to get the full matching contribution, otherwise you're passing up 'free' money" (Isaacson 2002).

Be willing to sacrifice some money today so you can have your retirement dreams. Set goals for the future. Here are a few ways to save money: Put money in the 401 (k) plan at work, cut your long-distance calls, use a consolidating loan to refinance student loans to save on interest, change your tax withholding (W-4) to take out less money, and lower spending by eating at home (Fitzpatrick 2002).

Become educated about stocks and bonds.

Learn how tax laws affect investments.

Try saving at least four percent on the retirement plan.

Open an IRA account. Put as much money as possible in the 401(k).

Pay off credit cards and put that in retirement.

Strategic Planning at Age Thirty:

Slow down on spending especially on credit cards.

If a retirement plan has not been started, now is the time to begin.

Buy a house even if you are single.

Teach children the basics of money management.

If the spouse handles the finances, learn how he/she handles it.

Strategic Planning at Age Forty:

Review any investments that have been made.

Increase retirement savings to at least 10 per cent of the income.

If there is not any investing or saving, definitely begin now.

Update the retirement plan as needed.

Fifty is the Age to Get Serious About Retirement Planning:

Do not be so conservative. Be willing to put money in both stock and bonds.

Utilize the catch-up that some companies have. If possible, put an additional $500 in the IRA.

Purchase long-term care Insurance.

Invest for growth.

Update retirement plan as needed.

Retirement or Re-career

Make serious plans for retirement.

Put more into the retirement fund.

Revise your will.

Retired? Begin some college courses for a second career.

Think about how to spend the retirement years.

Building a Strategic Retirement Plan

Choose a financial advisor to look at the retirement plan and be willing to accept the changes he/she suggests. People of retirement age were hit hardest by falling stock recently. It is important to have stock in more than one place. Stocks and bonds are important in the retirement plan. Seek professional help. Some companies offer free professional help with retirement planning and in buying stocks and bonds. "A law that took effect in January (part of last year's massive tax cut measure) allows employers to offer not just education related to your company plan but also broader "retirement advice" to you and your spouse individually, as a fringe benefit. This means your employer could take a tax deduction for the cost, and you wouldn't have to pay taxes on the value of the advice/benefit you receive" (Hoffman 2002). Take advantage of this if possible. Read about financial planning. Subscribe to some "Money" magazines. Do an analysis of your retirement plan. Here are some examples of how stocks and bonds have lowered:

401 (k)s and How Account Balances Can Shrink (McNamee 2002):

Average assets per 401 (k) Participant at yearend:

Data: Cerulli Associates

Bear Markets:

The bear market has slashed the portfolios of workers and retirees alike -- but it's retirees who are bearing the blunt" (McNamee 2002). The last two years have been difficult for those in retirement. A question was asked to adults about their savings for retirement and they said:

In the last two years, has the value for your savings for retirement increased: Retirees said that it had increased by 30%. Workers said that it had increased by 33%. Many stated that it had decreased by over 50% from retirees and workers. Many feel that they are confident that their retirement fund will be enough when they retire, but over 30% of the people said that it might not be. This is something that must be considered in making and updating the retirement plan.

401 (k) and 403 (b)

These are both employer-based plans and have been named for the sections of the tax code that created them. They allow employees to save pretax dollars for retirement. For instance, out of a 35% combined federal and state…

Cite This Term Paper:

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