Retirement Planning A comfortable retirement is a goal for most workers, but ensuring that comfort takes planning and foresight. Planning for retirement is much more complicated than opening a bank account or belonging to an employer-sponsored pension plan. While these are excellent beginnings, workers must plan for any and all events that can and will happen after retirement. Employees not only need to plan for retirement income, but they must also plan for the disposition of assets upon death. Employees need to decide where they will live after retirement, how tax matters with be handled, what insurance will be needed, and the list goes on.

Planning for retirement should begin as early as possible in life. With some careful thought, however, the planning process can be started at any time. The secret is to actually put together a plan at any age, however, the sooner workers begin planning, the more time they will have to build an investment portfolio to generate retirement income. Avoiding the most common pitfall is key: "One the first mistakes people make when it comes to retirement planning, or lack of it, is not coming up with a good estimate for how much they need to have in the bank before they can quit work for good" (Max).

The first step in retirement planning is to start putting money aside for income. Once the investments are set up, they should be monitored with a broker or financial advisor. It's important for workers to set up tax strategies that will protect their assets and limit tax liabilities after retirement, and its important to remember that retirement can last for 20, 30 or more years. When retirement age approaches, workers should start to thinking about where they would like to retire and whether or not they plan to travel.

For married couples, retirement planning with the spouse is essential. Couples should discuss retirement plans in detail; chances are both spouses with retire at about the same time so they need to be in agreement on this critical part of their life. If both spouses have a career, they will both be contributing to the retirement fund. Both parties should agree on the plan and work together for mutual benefit. If both have a career or job, both incomes need to be taken into consideration and planning should be done accordingly. Couple should consider the types of insurance both spouses will need and consider how that will affect their retirement income. Once a couple reaches retirement age, they will probably not require as much income for living expenses but could be paying out huge amounts for insurance premiums or health care. "Look for investments that will give you steady growth with a minimum of taxable income. And never make assumptions about the tax consequences of your investments -- read the fine print" (Dratch).

Getting started can be the hardest part of a retirement plan because retirement age seems a part of the distant future. However, procrastination could cause workers to lose thousands of dollars and could mean the difference between a comfortable retirement and one where a person is barely getting by. People between the ages of 20 and 40 are typically buying a house, a car, furniture, and thinking about their kid's college fund. At this age, people often think they can't afford to save for retirement at this time, but even a small amount invested wisely could be very beneficial in years to come.

Setting goals and budgeting

The first step in retirement planning is listing goals and creating reasonable budgets. Workers should decide what's most important to them: "With those "core" values identified, a financial plan can be built to help make the dream an eventual reality, while helping the client incorporate those ideals into day-to-day living" (Weston). People should consider whether they want to travel, move to a warmer climate or buy a vacation home. Whatever the goals, an income is necessary...

It's important for current employees to be realistic about their goals in order to accurately calculate how much money they will need in retirement. "Figure out what you need coming in each year to live the way you'd like, and allocate your money accordingly" (Dratch).
The next step is budgeting. Experts recommend that employees keep a current journal of how much they spend in order to see where the money is going and be able to better manage expenses. A solid budget must include a payment to a retirement savings fund even if it's only a few dollars a week. A crucial part of budgeting is avoiding unnecessary and excessive spending.

Even the best retirement plan could be in serious trouble if individuals allow themselves to dip into it for frivolous luxuries. If the budget doesn't seem to cover all a worker's expenses, chances are the employee is confusing necessities with luxuries. Little things eat away at a budget; an individual doesn't have to do without luxuries or treats as long as he or she is spending wisely.

Making investment choices

Once money is put aside, investment choices must be made in order to make the retirement nest egg grow. When putting together a retirement plan, employees need to make several investment choices, and the age at which retirement planning begins dictates how critical these choices will be. Workers between the ages of 20 and 35 have time to shop around and try different strategies. People between the ages of 35 and 50 still have time to build a good retirement fund but will need to look closely at their portfolios to be sure they are investing wisely. Older people aged 50 and up need to look at all the options and choose investment strategy very carefully to balance risk and reward.

Investment choices break down along two basic lines: short-term and long-term investments. If investing for the short-term, employees have several choices available to them. Basic bank accounts, such as checking and savings accounts, are all examples of short-term investing, but they typically don't offer high interest rates. Short-term investments do, however, provide much less risk than other types of investments and are typically a part of the retirement plans of older people who don't have as much time to invest before retirement age arrives.

The best and most effective way to save for retirement is in the long-term. Workers who have funds that aren't needed immediately should consider investing them in long-term investments. Long-term investments include stocks, bonds, and mutual funds. Investing in stocks provides partial ownership in a company, and if the company is successful, investors should make money when the stock is sold. Some companies pay stockholders dividends on a regular basis. A broker is usually needed to purchase shares of stock and it is important to thoroughly research the company before investing in it. It is best to hold onto stocks for a long period of time because of the fees associated with buying and selling and the tax implications. Also, the stock market may fluctuate in the short-term, but it has a definite upward trend over the long-term; if an investor sells his or her stock too quickly, he or she won't realize the benefits of this upward trend on return on investment.

Bonds and mutual funds can be high risk or low risk. The high-risk bonds pay more interest. Bonds are actually loans to businesses, government, and so on that is held for certain periods of time called term or duration. The money earns interest for the duration of the bond and principal and interest are paid at the end of the term. Mutual funds allow small investors more diversification than individual investing. These funds pool the money of several investors and invest in several different companies in such a way as to minimize the risk. By investing in several different companies, the theory is that if…