retirement programs The three biggest mistakes that people make in retirement planning are:
a. They start too late.
b. They put away too little. c. They invest too conservatively Many people simply do not start thinking about retirement until they are in their 40s or 50s; by then, it may be too late to produce the kind of retirement nest egg they want. As a result, many people just have to make do with less in retirement. Likewise, people do not put enough away for retirement. Obviously, the less we put away prior to retirement, the less we are going to have in retirement. Finally, too many people treat their retirement plans like savings accounts rather than investment vehicles by placing most (or all) of their retirement funds in low-yielding, fixed-income securities (like Treasury securities and bank CDs). As a result, people end up earning dismal rates of return on their money. All three mistakes become doubly important when we introduce compound interest, because compounding magnifies the impact of these mistakes. In compounding, we are essentially letting our money work for us. Naturally, the less there is to work with, the less we will have in the future. Obviously, when it comes to retirement planning, it pays to start early, save a lot, and invest your money at reasonably aggressive rates of return. 2) What are the most important sources of retirement income? 2) What are the most important sources of retirement income? The most important sources of retirement income are: (I) Social Security, (ii)personal assets (savings, investments, self-directed retirement plans), and (iii)employer-sponsored retirement plans.
While Social Security may be the most common source,
it does not necessarily provide the largest dollar amount. 3) Discuss the relationship of retirement planning to financial planning Retirement planning is a key element in the financial planning process.
Retirement planning is a long-term process that
involves a strategy of systematically accumulating funds for retirement.
Retirement planning captures the very essence of
financial planning. It is forward-looking, has an impact on current and future standards of living, and, if successful, can be very rewarding.