Do you know what is hot in the financial planning world these days? Retirement. For probably the first time in the capitalism history, we have a massive population (the baby boomers) that is about to retire. The problem is that most of them never planed it and counted on the Government. Well guess what! Our dear Canadian Government is giving us about $800 a month to finish our old days. Still interested in retiring?
There are 5 major factors that could influence your retirements. While current retirees are concerned about it, we should plan in order to avoid them.
The price of goods keeps increasing years after years. Therefore, a dollar earned today will most likely worth $0.70 in 10 years. If your investment returns are too closed to the inflation rate, you will be struggling trying to maintain your power of purchase. In order to avoid this problem, an increase of your asset allocation towards stocks should solve the problem.
This is what happens when you invest purely in the stock market. If you depend on your investment income to eat, you surely don’t want your nest egg going down 10% in a month. However, a good diversification among Canadian, American, International and Emerging market stocks should smoother any market bumps.
For those who plan to live until the age of 75, you might be running out of money for another 10 years! By the time I reach 80, I will probably have a life expectancy of 100 years! I would suggest you plan having money until the age of 90. You will surely slow down your expenses rate for the last ten years, but it may also be the opposite if you require specific health treatments. So thinking that you start working and saving money for your retirement between 25 and 30, if you want to retire at 55, it leaves you not more than 30 years to accumulate enough money to live over another 45 years. Systematic savings at a young age could definitely be the key to avoid any problems.
image source: boieng.com
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