Retire at Young

Who should plan for retirement?
We hear a lot about retirement planning these days, but who, exactly, should be planning? How important is it, really? The hard truth is that everyone who does not anticipate generating regular income during their golden years should be setting funds aside now for retirement.

But what if you haven't started, don't have a lot of money to invest, or simply aren't sure where to begin? Not to worry. Together with our retirement planning calculator, you can construct a retirement plan and then determine which investment tools will best help you reach your goals. Take a look below for information on the basics of retirement planning and how to get started.
 
The changing face of retirement
It used to be that retirement wasn't all that serious a life change to consider: people didn't often expect to live much past their fifties, and certainly did not view their post-working years as a time to reward themselves. If medical issues arose or expenses mounted beyond their expectations, their children tended to assume the role of caregiver and financial supporter.
Nowadays, however, retirement is viewed in quite a different light. This is due primarily to the change in our life expectancy and the belief that some of our best years are ahead of us that retirement is a time for travel, leisure, and realizing our dreams. Even if our goals are modest, most of us still do not want to burden loved ones with medical expenses or worrying about our financial situation.
But whether you plan to travel the world or simply hope to maintain your independence, your retirement income will largely depend on your personal contribution that is, your portfolio of savings and investments. EPF and pensions can be important supplemental sources of income, but they may not be enough to allow you to retire comfortably.
To preserve your current standard of living, you must take the task of retirement planning seriously. And the sooner you choose to begin, the better.
 
Deciding when to begin
Much like changing jobs, buying a home, or starting a family, there is often no convenient time to start planning for retirement. But the sooner you start, the less hard you and your money will have to work.
The more time you have before you'll need to access your retirement funds, the more opportunity those funds will have to grow. As a result, the investment amount needed will be considerably less.
Whatever your age or financial picture, don't put off planning for your retirement any longer. Make a commitment to start your planning now and put the power of compounding returns to work for you.
 
The power of compounding
Time is one of the most important advantages of retirement plans. With the framework and discipline of retirement plans, you have the potential of realizing significant gains from seemingly minimal contributions. The power of compounding returns can't be overstated. Consider the following scenario: Beginning at age 18, Megan invests approximately RM2,000 to a mutual fund per year over a period of eight years, and then stops. Sam doesn't start investing for retirement until age 26, but he invests RM2,000 per year over the next forty years. Even though Sam contributes RM64,000 more than Megan, he can never catch up: at age 65, her mutual fund fund will be worth RM1,035,160, whereas Sam's mutual fund fund will only be worth RM885,185*.
Procrastinating can exact a costly price when it comes to retirement planning. As the saying goes, time is money!
* Figures assume a 10% annual return; figures assume no transaction costs or taxes deducted from the account. This is a hypothetical example and is not indicative of the actual results of a particular investment.
 
The risk factor
You can expect that with any investment, there will be some risk. And it makes sense, then, that the greater the risk, the higher potential there is for big returns on your initial investment.
When determining which financial instruments to incorporate into your retirement plan, consider both the amount of risk involved and your risk profile. Are you comfortable with taking calculated risks? Investing in stocks and mutual fund may serve you well. Or would you prefer a more moderate or even low level of risk? Then you might want to consider bonds and money market accounts. Whatever financial vehicles you finally decide to put to work for you, keep in mind that experts generally recommend a balanced and diversified investment portfolio.
You should also take into consideration the amount of time you have to invest; if retirement is 20+ years away, you might be able to afford a greater amount of risk. If, on the other hand, you're beginning late and will need access to your money in five years, you'll probably want to be more conservative in your approach. Our asset allocation calculator will be able to guide you on the suitable investment mix suitable for you.
But it goes without saying that the greatest risk of all is not taking your retirement planning seriously. That's a risk that you simply can't afford to take.
 
Setting goals and creating a plan
Now that you have some understanding of the basics of retirement planning and its importance, you're ready to formulate a plan of action. But how?
First, begin by envisioning your retirement years. Will you want to travel or indulge in recreational activities? Do you plan to stay in your present home, or will you downscale? What will your expenses look like? Determining how much you need is essential to creating a workable retirement plan.
Next, measure the amount you think you'll need and compare that to how much you can accumulate between now and retirement.
No matter your age or level of income, you can protect yourself from most financial surprises later if you plan now. Planning gives you the power to turn your retirement dreams into reality.

Source from http://www.ykconsultancy.com