by Vida G

Created on: July 28, 2008

Retirement Do's and Don'ts:
Having been a financial coach myself, I have come to the conclusion that whomever decides to save for their retirement is naive. Saving money at home will gain no interest and will depreciate faster than one can "save" it. Saving money in a bank will do the same. People bent on saving should realize that the average inflation rate is about 5% percent per year, therefore, after having one thousand dollars tucked away for one year your dollar will spend 5% less. It would be like having fifty less dollars. It would be worth the same (in spending value) if you put the thousand dollars in a cd for 5% and it gained the fifty dollars. This being said, you should consider investments that will yield more than 5% if you plan on actually making a profit from your investment.

In order to retire successfully one must invest in their retirement (not save). Basic "insurance" rules tell us not to put all of our eggs in one basket, thus, multiple sources of income are important to consider when planning one's retirement. Being debt free, having a good Long Term Health Care Insurance Policy, owning property, and a variety of stocks/mutual fund investments is the key. Also, one should not forget to have a living trust for your inheritors, as a will is contestable.
One thing, I wished for my clients is that they would think outside-the-box and consider retiring out of state, or out of the country where their dollars would stretch further. Many islands and tropical countries offer gorgeous estates for fractions of what they would cost in the US.
Social security, for a person of my age (25) is not something one can depend on; therefore, it is imperative that we plan now. Persons closer to retirement should learn all they possibly can about social security, a good place to start is: http://www.trimonline.org/topics/social_security/tru th.htm
However, the most important thing to realize is that it should not be used as a primary source of income, it was meant to be a crutch, so that it could be used in times of unforseen need. This is why, planning your own retirement and relying on yourself is so very important.
Does this mean that you should not have any fun while you're young? Of course not! What it does mean is that planning a real budget, creating extra revenue and taking on some investments is crucial.
That is all, thank you.

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